An FHA Streamline allows those with existing FHA loans to do a rate/term refinance with a few special benefits. To begin with, you may be able to refinance into a lower rate even if you owe more on your home than it’s worth.
The logic here is that if you have a more affordable payment, you’re more likely to be able to stay in your home and pay it off, which is good for the FHA. You’ll also usually be able to get a lower mortgage insurance rate as the MIP for FHA Streamlines is 0.55% of your overall loan amount annually. Additionally, the upfront MIP is only 0.01%.
Another benefit of FHA Streamlines is reduced documentation. Every situation is different, but because you already have an existing FHA loan, you may qualify for less documentation in each of the following areas:
Reduced appraisal requirements
Limited employment verification
Less documentation for income and assets
There are some other things to keep in mind. If you don’t have an existing FHA mortgage with the lender you are refinancing with there may be Credit Score Requirements. If you refinance your loan is with your existing lender, the required median FICO® is typically 580. Also timing is important. You have to have made at least six payments on your current loan before you can do a streamline. And, at least 210 days have to pass between the first payment you make on your current loan and the first payment on the new streamline FHA Loan.
Finally, you have to be current on your FHA loan. For the purposes of an FHA Streamline, that means having no 30-day late payments in the last 6 months and only one payment that’s 30 days late in the last year.
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