Rules Are Changing for FHA Streamline Refinance

Are you aware that the FHA Streamline Refinance will have a new set of rules?  The new rules will become operational on November 17.  The process of application can become more difficult because of these changes.      

Until today, the process of getting FHA Streamline Refinance is very simple.  Basically, you will apply for refinancing and you can get guaranteed approval.  If you are holding an FHA mortgage and you are making payments on time, then there is no need for you to produce other requirements like proof of income, assets, credit score, and appraisals.  Unfortunately, the process is about to change and new rules will be implemented.  

Required Documentations Needed For the New Rules

Based on the new rules for FHA Streamline Refinance, you will be required to provide proof of verified income and assets.  You are also required to provide your credit scores.  Appraisals may not be necessary in some cases.  However, if you will roll the closing costs into the new loan, then you need to have an appraisal.  You are also required now to pay for points separately if you want to trim your interest rates.  

Although there are new sets of rules for FHA Streamline Refinance, obtaining this type of loan will remain easy.  The key requirements are still the same.  You need to have an FHA mortgage and you must show that you are a good payer.  

If you are holding the mortgage for less than 12 months, then you must not have a single late payment.  If your mortgage is more than one year, you could have at least one late payment in the past 12 months and still qualify for the loan.  The new rule is that you can not apply for refinancing if you’ve had the loan for less than six months.  

A most significant change is the loan-to-value limit.  In the past, you could go over 100 percent loan-to-value limits in order to cover the closing costs.  Under the new rules, the loan-to-value limit is set at 97.5 percent.  This will surely dash the hopes of ‘underwater’ homeowners who like to get lower rates through refinancing.  

Viable Option for ‘Underwater’ Homeowners

You can easily refinance based on the original appraisal of your home if you opt not to roll the closing costs on the new loan.  This is a good option for ‘underwater’ homeowners.  Even if the value of your home has fallen greatly, you can still refinance the remaining balance of the mortgage with lower interest rate.  The catch is you should shoulder all the closing costs.  

Closing cost can be significant.  It could reach up to two percent of the loan balance or greater.  However, if you get at least a percentage point lower interest rate, then you can recoup your closing expenses pretty quickly.  There are still other new rules that will be attached to FHA Streamline Refinance that you should carefully study.  

Until now, the process of applying for FHA Streamline Refinance is easy.  But because of the new rules, the process could become more difficult.  Fortunately, FHA Streamline Refinance is still a very good option for refinancing your home.  

Article Tags: Streamline Refinance, Closing Costs

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