FHA Rates and Monthly Payments Drop with Streamline Refinances

Many homeowners who took out a Federal Housing Administration (FHA) mortgage in the last year or so are dropping their interest rates and monthly payments by doing a “streamline Refinance.”  A streamline refinance is a program that FHA has where homeowners can refinance their existing FHA mortgage without re-qualifying and avoid many of the costs of a normal refinance. Until recently, FHA rates have been in the 6%’s and currently they’re in the low-to-mid 5%’s.  Many borrowers can save a sizable drop in their payment by considering this program. For a borrower with a $200,000 loan amount dropping from 6 ½% to 5 ½% may see a monthly savings of $128 per month.

The borrower has virtually nothing to do to qualify for the FHA streamline refinance.  There is no employment, income or asset documentation required.  There is no appraisal required, so that cost of approximately $400 is avoided.  The value of the property is typically not relevant with this refinance program.  The reason FHA streamline refinances do not require re-qualifying or doing an appraisal is because these processes were already completed when the initial FHA loan was taken out.  The borrower does have to have an existing FHA mortgage to qualify for the FHA streamline refinance program.  The lender can require that the borrower(s) has not had a 30 day mortgage late payment history since taking out their previous FHA mortgage loan.

FHA streamline refinances can have closing costs depending on how low of a rate the borrower is considering.  Often, much or all of the costs can be built into the new loan balance when refinancing.  This refinance program can also offer No Cost Refinances for a slightly higher interest rate. Their may be some additional mortgage insurance costs involved with a FHA streamline refinance.  However, often those costs are minimal if the previous FHA loan was taken out within the last year.  If you currently have a FHA mortgage, be sure to consult with a knowledgeable mortgage loan officer to see if a FHA streamline refinance can make sense for you.

Nick Sivertsen, Summit Mortgage nick@nicksivertsen.com