FHA Streamline Refinance (Claim Your Benefits!)
Ever since the start of the pandemic, essential payments such as mortgage financing have proven to be quite a headache for most homeowners. The obvious health effects that the pandemic has had on most people notwithstanding, the economic toll of the same has been regarded by some as being far worse than the virus itself. With many people falling back on their mortgage payments, this has led to an obvious increase in the need for reliable and functional refinancing options.
What is a Streamline Refinance?
Streamline refinance is one of the few refinancing options that allow its subscribers to refinance with little to no home equity. By offering government-backed mortgages, streamline refinance is truly focused on the everyday homeowners in the way that it makes mortgage access easy with the least possible paperwork involved.
Contrary to most other refinancing options, with streamlined refinance, it’s not necessary for any interested lender to explicitly check on your employment status, income streams, or creditworthiness. Due to the minimal bureaucracy involved in the process, streamline refinance is famed in many quarters as being one of the most straightforward mortgage options. Informally, it’s usually regarded by industry players as being the “low-doc” mortgage option.
By being government-backed, streamlined refinance mortgage options are typically low-interest loans. This low-interest approach is influenced in part by the government’s role of having to at the very least provide housing and therefore mortgage options for as many of its citizens as it possibly can.
Who can use a Streamline Refinance?
Streamline refinancing is typically offered by most if not all government-backed loan options like VA loans, FHA loans, and USDA loans. Though the streamline refinancing issuance has little bureaucracy in comparison to other options, eligibility is not guaranteed for all individuals who are subscribed to whichever form of government-backed loans.
Unfortunately, most homeowners who are subscribed to most conventional private mortgage options are not eligible for streamlined refinancing. An example of those who may be ineligible for streamlined refinancing are homeowners with mortgages from Freddie Mac or Fannie Mae. For Fannie Mae mortgage homeowners however there’s one exception, homeowners may be eligible for High LTV refinancing options if their mortgage is backed by Fannie Mae.
FHA Streamline Refinance
Instituted by the Federal Housing Administration (FHA), the FHA Streamline Refinance option is a housing financing option aimed at helping homeowners subscribed to FHA loans in minimizing their monthly payments and interest rates. One of the biggest selling points for the FHA streamline refinancing option is the reduced bureaucracy and therefore paperwork, which helps in speeding up the entire process.
Available to homeowners with FHA-backed mortgages, the FHA streamline refinance option is made available to homeowners with considerably reduced requirements in comparison to other refinancing options. For one to be eligible for FHA streamline refinancing, they first have to be subscribed to FHA backed mortgages, and then meet the following requirements:
- There must be documented indication of a clear benefit, which is usually set at a rate that’s lower than half a percent.
- Indication of at least three months of undelayed mortgage payments.
- Provide documented evidence of having not received refinancing at least 210 days prior.
VA Streamline Refinance “IRRRL”
The Interest Rate Reduction Refinancing Loan, or typically VA streamline refinancing is a loan package that’s aimed towards reducing the borrower’s initial mortgage interest rates. Ideally, the VA streamline refinancing can also be used to convert a borrower’s adjustable-rate mortgage into a fixed-rate mortgage. For those seeking to make use of an IRRRL, this can be done only on properties for which the owner had already used their VA loan eligibility on getting other financing options.
One of the little-known perks of the VA streamline refinance option is the fact that it can be facilitated with “no money out of pocket”. This costless refinancing can be made possible through the inclusion of all the costs in a new loan. Alternatively, the IRRRL can be facilitated by no extra costs by ensuring the interest rates on the new loan are lower than those of the old loan.
Different lenders have varying in-house rates and subsequently different terms in the house financing options they offer. With this in mind, potential homeowners with eligibility for the IRRRL are usually advised to reach out to several lenders before making their final decision to compare the different rates. It is worth noting that the only cost requirement by the VA is a funding fee of 0.5% of the loan amount, with the option of either having it included in the loan amount or paying in cash.
USDA Streamline Refinance
The USDA Streamline Refinance package is instituted in part by the United States Department of Agriculture (USDA), which is a refinancing option that is available for homeowners with USDA-backed mortgages. This refinancing option is one of the few that is available for homeowners across all the states, albeit initially in only thirty-four states for its pilot phase.
Like other streamline refinancing options, the USDA streamline refinancing doesn’t require verification of employment, income, or creditworthiness. However, one’s eligibility for the refinancing package is determined by the following conditions:
- The home for which one is seeking refinancing must be documented as being their primary residence.
- In your mortgage repayment history, there should be no delayed payments within twelve consecutive months.
- The home for which you’re seeking refinancing must be physically located in one of the initially thirty-four pre-approved states
High LTV Refinance Option “HIRO”
Known as the Fannie Mae High LTV Refinance Option (HIRO), this refinancing package is available for homeowners with little to no equity, to enable them to achieve a reduction of their initial interest rates and subsequently their monthly payments. From its inception, HIRO was designed to yield the most benefits for homeowners who have not quite made any benefits from the growth in home values over the past few years.
The Fannie Mae High LTV Refinance Option is famed as being one of the few available refinancing packages that are designed to benefit even homeowners and borrowers who are subjected to pay for their homes more than the property’s worth. Through the HIRO framework, homeowners unable to refinance at today’s rates can be able to achieve affordable mortgage payments as well as lower rates.
Currently, the HIRO package is available only to homeowners with Fannie Mae-backed mortgages across all the states. Aside from that, the other prerequisites for one to access HIRO refinancing are:
- The homeowner should have no late mortgage payments within six months before their refinancing application.
- Before the HIRO refinancing application, the homeowner should provide documented evidence of having a mortgage for not less than fifteen months.
- Within the past year before the HIRO refinancing application, the homeowner should have no more than one delayed mortgage payment.
- The mortgage for which the HIRO refinancing is being sought should not have been obtained earlier than October 2017.
Pros of FHA Streamline Refinance
One of the most obvious perks of the FHA streamline refinancing is the reduced monthly payments. This payment reduction is achieved through a reduction of the initial interest rates on the mortgage. Another way through which the reduced monthly payments are achieved is through an extension of the loan repayment period, with a limit of up to twelve years on the extension.
For homeowners trapped to paying mortgage payments that are considerably higher than their property’s worth, the FHA refinance offers a refinancing option for the same. With the FHA streamline refinancing, the loan amount is determined by the outstanding principal balance on the loan, making the refinancing option available even for underwater mortgage owners.
Cons of FHA Streamline Refinance
For both the FHA streamline refinancing and the FHA loans, it’s a prerequisite that you pay a mortgage insurance premium. This insurance payment is targeted towards protecting your lender if you were to default on your loan repayment. The mortgage insurance premium is mandatory as long as you are making use of the FHA refinancing.
Streamline Refinance FAQs:
Is FHA Streamline Refinance Legitimate?
Yes, the FHA streamline refinancing is indeed legitimate and is backed by the Federal Housing Administration. Though the benefits from the refinancing package may seem too good to be true for some, its low-documentation application procedures are aimed at making it easy for people to enjoy low rates on their mortgage payments.
Do I have to Pay Closing Costs on an FHA Streamline Refinance?
For both the FHA loans and the FHA streamline refinancing, you are required to pay closing costs. The closing costs for an FHA refinance package can be included on the loan amount, under the condition that you have your property reappraised and there’s enough equity on your property to cover the additional cost.
Can you be Denied a Streamline Refinance?
Though rare, some FHA streamline refinancing applications can be denied for reasons like incomplete or unverifiable information during the initial application. Unlike most other refinancing options, the FHA streamline refinancing is one of the easiest to achieve due to the reduced requirements like credit or debt status checks.
Does FHA Streamline Refinance get rid of MIP?
To get rid of mortgage insurance premiums (MIP) on your FHA streamline refinancing, you have to either:
- Replace your FHA refinancing with a conventional loan that doesn’t require mortgage insurance premiums,
- Or wait for the expiry of your FHA mortgage insurance premium.