FHA Streamline Refinancing: Understanding The Basics

Normal refinances are much more difficult to process than a streamline refinance. This type of refinancing doesn't require a new appraisal or full credit report as long as the new loan amount does not exceed the original loan amount. A streamline refinance is much faster and easier to approve and close on because of the fact that they require so little documentation.

Basic Requirements For An FHA Streamline Refinance
-Mortgage being refinanced must already be FHA insured
-The mortgage being refinanced may not be delinquent
-Borrower's monthly payment must be lowered
-No cash out

There are certain things that need to be taken into account when doing an FHA streamline refinance. First of all, the mortgage being refinanced already has to be an FHA approved first mortgage. There is no cash out allowed by the borrower, and the purpose of the refinance is to simply lower the borrower's monthly interest and principal payment. To provide for closing costs, there may be a minor adjustment in the no cash out clause allowing up to an additional $500 above the original loan amount.

The only repairs that are required to be completed when doing an FHA streamline refinance are those that deal with lead based-paint. If the lender requires any other repairs to be completed by the borrower they must be paid for out of the borrower's pocket.

FHA streamline refinances don't require an appraisal, but in cases where an appraisal is done, the maximum insurable mortgage is figured out differently.

Calculating the maximum insurable mortgage amount with an appraisal is the lesser of the following two calculations:
1. Maximum LTV(Loan-to Value) percentages multiplied by appraised value, excluding closing costs.
2. Sum of existing FHA first mortgage, accrued late charges, prepaid expenses needed for the escrow account, escrow shortages, closing costs and reasonable discount points minus any upfront MIP refund.

Without an appraisal, the maximum insurable mortgage amount is calculated by the lesser of the following:
1. Original loan amount with any upfront MIP and new UFMIP charges included.
2. Existing debt calculation, which is the same as number 2 above but also includes the expense of the new up-front UFMIP.

There are a couple of ways in which lenders can offer an FHA streamline refinance to a borrower.

-No Cost Refinances- No out of pocket expenses to the borrower. All expenses are paid by the lender. This will likely result in a higher interest rate than if the borrower had paid the expenses out of their own pocket.

-Closing Costs Included In New Mortgage Amount- If there is sufficient equity in the property as determined by an appraisal, then the closing costs can be included in the new loan. This can also be done without an appraisal as long as the new loan amount does not exceed the original loan amount.

Actual rates and fees for an FHA streamline may differ depending on the lender you choose, but the basic requirements will be the same. Provided you already have an FHA first mortgage, an FHA streamline refinance program is likely going to be the easiest and quickest form of refinancing you will find.

Article Tags: Urabl Mortgag, Mortgag Amount, Loan Amount

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