The word on FHA mortgage refinance
The FHA has had a program called a streamline refinance for “insured” mortgages since the early 80's. The "streamline" part refers to the amount of documentation and underwriting that needs to be done by the lender, and does NOT mean that no costs are involved in the closing or transaction.
The basic requirements of a streamline refinance are:
- The mortgage to be refinanced must already be FHA insured
- The current mortgage should be current (not delinquent).
- The refinance has to result in a lower monthly principal and interest payments.
- No cash may be taken out on mortgages refinanced using the FHA streamline refinance program.
Lenders may offer streamline refinances in several ways. Some lenders offer "no cost" (out of pocket) refinances by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the lender pays any closing costs that are incurred on the transaction.
Brokers and Lenders may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by an FHA approved appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed the original loan amount.
You may also get a much lower interest rate on your refinance if you go FHA. FHA loans can offer much better loan terms than traditional mortgages because once again, they are guaranteed by the federal government. Because of the guarantee, lenders feel more secure with the loan, and can offer lower long-term fixed interest rates.
With an FHA mortgage refi many borrowers with non-standard credit are now able to:
- Refinance to a more reasonable monthly payment
- Refinance a troubled mortgage and avoid foreclosure.
FHA loan programs are not credit score driven, so you do not have to have perfect credit to refinance through the FHA. The FHA requires certain standards in order to offer you a loan guarantee, but the lender is still guaranteed their money in case of foreclosure, so they are more likely to fund the loan even if the borrower's credit is not ideal.
FHA Loans are secure and stable for both the lender and borrower
Where traditional lenders will help you get your mortgage, and then leave you on your own, the FHA stands behind it’s loans. In times like these your mortgage may be bought by or sold to other companies and you will never see or deal with the original lender
|
