FHA has permitted streamline refinances on insured mortgages since the early 1980's. The "streamline" refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction.
The FHA Streamline Refinance is designed to lower the interest rate on a current FHA mortgage or convert a current FHA adjustable rate mortgage into a fixed rate. A Streamline FHA Refinance Loan can be performed quickly and easily. FHA Streamline fixed mortgages require much less hassle and paperwork than a normal refinance including no appraisal, no qualifying debt ratios and no income verification.
What is the FHA Streamline Refinance? The FHA Streamline Rrefinance has been around since since the 1980s. A Streamline Refinance is the much like a normal rate/term refinance, but with reduced paperwork. It does not eliminate the fees or costs associated with refinancing, however, some fees and costs may be reduced because of the reduced paperwork and requirements that must be met.
What are the basic requirements for an FHA Streamline Refinance? * The mortgage to be refinanced must already be FHA insured.
* The mortgage to be refinanced should be current (not delinquent). * The refinance is to result in a lowering of the borrower's monthly principal and interest payments.
* No cash may be taken out on mortgages refinanced using the streamline refinance process.
How much can I refinance? The maximum amount for an Streamline FHA loan is determined by
* Maximum Loan Amount The maximum loan amount allowed for FHA Refinance Mortgages varies from county to county. The highest maximum FHA mortgage right now is $729,750. The lowest maximum amount available in any county is $271,050. To see what the limit is in the county in which you're interested, visit the following site https://entp.hud.gov/idapp/html/hicostlook.cfm. This site lists U.S. territories as well as states.
* Maximum financing: Depending on the state where the property is located, the maximum FHA financing for an FHA Streamline Refinance (No Cash-Out) will be 97.75% of either the appraised value of the home with a new appraisal or the previous loan amount.
More information on FHA Refinance.
FHA Refinance Loan FAQ's
Are there any out of pocket expenses for an FHA Refinance Loan? Generally, there are no out-of-pocket expenses incurred with an FHA Home Refinance, other than the appraisal fee. FHA Refinance Guidelines allow all other closing costs, including lender fees, to be included in the new loan amount, provided that the home will appraise for that amount.
Can I take cash out of my home with an FHA Refinance? Yes, with an FHA Cash Out Refinance, the home owner obtains a new FHA Mortgage Refinance for more than the amount owed on their current mortgage; meaning the homeowner pays off the current mortgage and then has additional cash to use however they want. They maximum loan amount for an FHA Cash Out Refinance is 85% of the homes current appraised value.
What are the guidelines for an FHA Refinance Loan? If the borrower wishes to take cash out of the property, then the maximum FHA Home Loan Refinance amount is 85% of the current appraised value. If the borrower does not take cash out then the maximum financing will be 97.75% of the appraised value of the home or the amount you are refinancing plus closing costs, whichever is lower.
Why should I consider refinancing into a FHA-insured mortgage? FHA Refinance Loans do not come with prepayment penalties, have no teaser rates nor balloon payments. They are offered at market rate with terms up to 30 years and are fully amortized, meaning that you pay towards principal and interest every month.
What if I have a prepayment penalty and other refinancing costs and there isn’t enough equity in my home to refinance? If you do not have sufficient equity in your home to add your prepayment penalty and/or other refinancing costs into your new FHA Mortgage Loan Refinance, then you should ask your lender to consider a second mortgage to pay the difference or a short payoff on your existing loan. Offering either of these options is at the discretion of the lender.
Does it matter that the value of my home is now less than what I still owe? The mortgage lender considering the refinance will have to be willing to accept a short payoff on the existing loan OR to hold a second mortgage to make up the difference needed to pay off the existing mortgage and the home’s value.
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