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FHA Streamline Refinance

 

May 5th, 2009

The easiest way to get a loan, with no income documentation, no appraisal and no credit check. Everything you should know about FHA Streamline refinance.
By Andre Plessis

About the FHA
The Federal Housing Administration (FHA), an agency of the federal government, insures private loans that are issued for new and existing housing, and loans that are approved for home repairs. Created by congress in 1934, the FHA became part of the Department of Housing and Urban Development's Office of Housing (HUD) in 1965.

FHA has permitted streamline refinances on insured mortgages since the early 1980's. The "streamline" refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:
 -   The mortgage to be refinanced must already be FHA insured.
 -   The mortgage to be refinanced should be current (not delinquent).
 -   The refinance is to result in a lowering of the borrower's monthly principal and interest payments.
 -   No cash may be taken out on mortgages refinanced using the streamline refinance process.

Lenders may offer streamline refinances in several ways. Some lenders offer "no cost" refinances (actually, no out-of-pocket expenses to the borrower) 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.

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 appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed the original loan amount. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal.

For FHA homeowners, there are three major reasons why the streamline refinance program can be superior to a conventional mortgage refinance.

  1. The FHA won't approve your refinance unless the new mortgage payment is less than your current one
  2. The FHA doesn't ask for an appraisal of your home and doesn't care if you're underwater
  3. If you've had your loan less than five years, the FHA refunds a portion of your original closing costs directly to your bottom-line

There are other differences between an FHA Streamline Refinance and a conventional mortgage refinance. First, FHA Streamline refinances don't require proof of income from the homeowner. You do not need to provide any paystubs, W-2 statements, or tax returns.  Instead, the homeowner must just prove that he's still employed.

One phone call to your current employer will accomplish that.

This "No Income Verification" nature of an FHA Streamline Refinance is in keeping with the FHA's over-riding philosophy that homeowners making payments at a higher mortgage rate should obviously be able to make payments at a lower mortgage rate.

It's the same for the "no appraisal" requirement.  Unlike conforming mortgages that are securitized and sold via Wall Street, the Federal Housing Authority is the only insurer and guarantor of FHA home loans.  Because of this, the FHA isn't concerned about whether its borrowers' home lose value it's on the hook for the loan either way. 

The FHA is more concerned about helping FHA homeowners get payment relief because it knows lower housing payment makes default less likely in the long-term.

However, getting approved for an FHA Streamline Refinance isn't easy.

  1. Homeowners must be current on their mortgage payments.  No 30-day, 60-day, or 90-day delinquencies are allowed from the last 12 months.
  2. Homeowners must have at least 6 months of history paying on their current mortgage. 
  3. The new loan size can't exceed the original size of the FHA loan being replaced.
  4. As of May 2009, the most common minimum credit score for an FHA Streamline Refinance is 620.

 
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Work With The Best!

Andre Plessis

REALTOR® at Keller Williams® Realty
RCS-DTM REALTOR® Real Estate Divorce Specialist

CA DRE License # 01856185

Keller Williams® Realty
340 N. Westlake Blvd. Suite 100
Westlake Village, CA 91362

Office: (818) 341-2972

Founder of The Wealth Creation Team

Office: (818) 341-2972
Toll-Free:
(877) 277-5937 or
Toll-Free: (877) APPLYFREE



 

Real Estate Advisor & REALTOR®
Certified Divorce Planner
Financial Educator

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The Best Person To Watch Over Your real Estate & Mortgage Planning Needs!

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- Albert Einstein

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Saving Money”

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The Wealth Creation Team Understands That a Key To Protecting Your Assets and Building Wealth is To Help Clients Manage Their Liabilities.

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"There is a science of getting rich. It is an exact science, like algebra or arithmetic. There are certain laws which govern the process of acquiring riches. Once you learn and obey these laws, you will automatically become a member of that select group of people who live 'The Secret' and you will get rich with mathematical certainty."


- Wallace D. Wattles, author, The Science of Getting Rich

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Search Real Estate Like an Agent: Visit: www.RealEstate-LosAngeles.net

                                     

"One of the keys to successful real estate investing has always been to purchase undervalued and distressed properties, as opposed to buying when it is overpriced."

 

Andre Plessis: Real Estate Agent in Canoga Park, CA

This site was last updated 04/25/10

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