An FHA Loan is a government sponsored loan program guaranteed by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD). Because the government insures the loan, you can get a better deal from your lender in terms of credit and down payment, which can be as low as 3.5 % of the purchase price. Furthermore, an FHA Loan consists of a range of mortgage products available for home purchase, refinancing, rehabilitation, remodeling or energy efficiency. Fixed terms are of 10, 15, 20 and 30 years with an adjustable rate mortgage (ARM).
Moreover, the U.S. Department of Housing and Urban Development (HUD) guarantees the FHA Streamline Refinance loan, which basically allows you to refinance your existing FHA with lower interest rates that reduce your mortgage payments and allow you to save more money in the long run. You may also choose to change the adjustable rate mortgage into a fixed rate and know exactly how much you have to pay every month to refinance your FHA Streamline. Keep in mind that this refinancing option is considered streamlined because it allows you to lower the interest rate on your current mortgage quickly and without an appraisal. The underwriting requirements are also fewer so you save time and money.
The Benefits of FHA Streamline Refinance Loan
Your lender may offer you no cost refinancing, which means you don’t pay anything out of your pocket as closing costs, but you are charged with a higher interest rate so that the closing costs are covered. Nevertheless, an FHA Streamline Refinance Loan is super beneficial for you as you can cut your expenses and save more money through lower interest and mortgage payments. Also, since the FHA Streamline is FHA-insured, the lender is protected in case you default.
Below you can briefly see the benefits of FHA Streamline Refinance loan:
- Lower interest rate
- Lower mortgage payments
- Change from adjustable rate mortgage to a fixed rate
- No appraisal required
- Easy qualification process
- Quick processing time
- Less underwriting requirements
- Easy refinancing process
- Low refinancing fees
- No prepayment penalty
- You increase your savings through lower interest payments
- You increase your savings through lower mortgage payments
- You pay off your debt faster through lower mortgage payments
Coupled with the lack of appraisal, the turnaround time for approval is typically as quick as two to three weeks. So, if you have been postponing refinancing thinking there is too much hassle involved, the FHA Streamline is an appealing solution.
Eligibility & Guidelines
To qualify for an FHA Streamline Refinance loan, you must meet the following requirements:
- Must hold an FHA loan before applying for FHA refinancing.
- You are current on your mortgage payments.
- No income verification required
- You must meet the net tangible benefit requirement, which means that refinancing must help you lower payment for mortgage, interest and mortgage insurance by at least 5%