What is an FHA Loan?
Part of the U.S. Department of Housing and Urban Development (HUD), a Federal Housing Administration (FHA) loan is a government guaranteed loan program designed to provide mortgage insurance on qualified mortgages. An FHA is a mix of mortgage products available for home purchase, refinancing, rehabilitation, remodeling or energy efficiency and you can borrow up to 97% of the value of your property and give the 3% as a down payment
What is the FHA Streamline program?
An FHA Streamline Refinance loan allows you to refinance your existing FHA-insured mortgage with a lower interest rate, thus lowering your monthly payments and saving money. In fact, you can switch from an adjustable rate mortgage to a fixed-rate mortgage and have full control on your monthly payments. Moreover, the FHA Streamline requires less documentation and underwriting and it comes under credit qualifying and non-credit qualifying options. The term Streamline refers to the amount of documentation required to be approved for an FHA Streamline program. Also, this type of loan requires no appraisal, which makes the process even quicker.
Why the FHA Streamline Program is popular?
Broadly speaking, an FHA Streamline can help you gain control over your finances by lowering your monthly payments through a lower interest rate on your mortgage or through changing to a fixed rate. There are significantly less qualification and underwriting requirements, thus, the process is expedited. The refinancing fees are lower and there is also no prepayment penalty if you decided to pay off your mortgage earlier. Being able to reduce your borrowing cost and streamline into a lower interest rate while rates are near historic lows has become a very popular option for many homeowners in the U.S.
Eligibility & Guidelines for an FHA Streamline Refinance
Below is a nice list of some of the guidelines and eligibility information that an investor will be looking for when a borrower is trying to complete an FHA Streamline.
- Must already have an FHA-backed loan before applying for FHA refinancing.
- Must be current on your mortgage payments.
- Must meet the net tangible benefit requirement. This means that refinancing will help you lower your mortgage payments, interest payments and mortgage insurance by at least 5%.
- No income verification required
- No appraisal is necessary