FHA Streamline Loan Requirements
FHA Guidelines and Qualifications for Home Mortgage Refinancing
Oct 16, 2009
Federal Housing Administration or FHA falls under the authority of the U.S. Department of Housing and Urban Development or HUD. FHA loans are backed and guaranteed by the federal government. Since the federal government guarantees the loan, there is less risk to the lending institution, allowing for a lower interest rate.
Benefits of an FHA Streamline Mortgage Refinance
Refinancing a current FHA loan with a FHA Streamline mortgage allows the lender to produce a minimal amount of documentation and underwriting, as opposed to a normal refinance. Some of the benefits for the Streamline loan can be:
- Limited documentation
- Flexible credit requirements
- Maybe able to avoid an appraisal
- The homeowner maybe able to refinance even if more is owed than what the home is worth.
Refinancing with an FHA streamline mortgage may result in lower monthly payments. There are three main reasons that a refinance may result in lower monthly payments.
- The interest rate is lower than the original loan
- The principal (amount still owed) is lower than the original loan
- The loan is extended for a longer period (i.e. 30 vs. 15 years)
FHA Streamline Refinance Associated Costs
There can be costs to the homeowner for a FHA Streamline refinance. The cost associated with the refinance should be weighed against the reduction in monthly payments. The cost associated with refinance can be added to the actual loan amount or paid separately. There can also be a no cost loan, but this would result in a higher interest rate. If the refinancing doesn’t result in substantially lower payments, the cost associated with the refinanced loan may not be beneficial.
Requirements for a FHA Streamline Mortgage Refinance
- The current mortgage must be an FHA backed loan
- The homeowner’s current mortgage must be current and not delinquent
- The refinance must result in a lower monthly payment
- The Streamline refinance is the principle only; extra cash cannot be taken out and added to the loan.
Other Federal Mortgage Assistance Programs
The Obama Administration developed a program designed to help struggling homeowner’s called, Making Home Affordable Refinance Program. The program has two components, a refinancing program and a mortgage modification program. The two programs are:
Homeowner’s looking to lower there monthly mortgage payments may qualify for one of these programs.
Not every financial institution is approved for FHA mortgage loans. The first step is to contact an approved mortgage servicer and find out what options are available. Learn about the various federal programs and ask the mortgage servicer questions about the programs. There are a few options that can be financial beneficial to a multitude of homeowners.
Source:
hud.gov
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