Refinance your Mortgage with FHA Streamline Refinancing

In the present scenario of foreclosure crisis, people want to know more about the facilities they have in refinancing their mortgages, so that they can escape foreclosure process. Streamlining the mortgages simply means regulating the present mortgage with modifications of interest rate and term of the mortgage - so that the regular monthly installments of Principal and Interest are brought down. The word “Streamline” is getting momentum presently and people often come across with advertisements about “No Cost Streamline” and so here are some helpful explanations.

Streamlining the mortgages is nothing new and FHA has been permitting streamlined refinances right from early 1980s. The term “streamline” refers only to the documentation and underwriting that is required to be performed by the mortgage lender. This process involves costs but some lenders offer “no cost” finances, without the borrower making any out of pocket expenses, but by charging a higher rate of interest on the new loan. This premium will help paying the closings costs by the lender.

The intention of the FHA streamlining the mortgages is to decrease the Principal and Interest payment, through the monthly installments by $50 or 10% of the installment amount. There are certain conditions to qualify for FHA Streamline Refinance namely –

* The intended mortgage required to be refinanced should be FHA insured

* It should be a current and ongoing mortgage and should not be delinquent mortgage

* There should be reduction in the monthly installments paid by the barrower out of the streamlined refinance

* There should not be any cash taken out by the borrower, using the streamlining process of the mortgage

The credit guidelines issued for mortgages govern FHA streamline refinancing. Even though mortgage lenders insist upon the credit score of the barrower to be above 600, for the purpose of FHA streamlining, the credit profile of the barrower is based only on mortgages and other liabilities of the barrower are not taken into consideration to decide Debt to Income (DTI) ratio.

Another benefit offered for FHA streamlining refinances is that 2nd mortgages (subordinate mortgages) can be there, irrespective of the total loan of the property either with appraisals or without appraisals. This exemption enables a lot of home owners suffering from the declining Real Estate markets, to qualify for prescribed Mortgage Rates applicable for 15 years, 30 years and ARM mortgages.

FHA streamlining refinances can be done in two ways – With Appraisals or Without Appraisals. If there is sufficient equity on the property as determined by an appraisal, Streamline Refinance can be done upto 97% of appraised value. Streamline Refinance can also be done without appraisals, with the condition that the new loan amount does not exceed the present mortgage loan amount. In other words the closing costs can not be added to the new line – either they should be paid by the lenders in cash or by a premium rate of interest. Particularly investment properties, in which the borrower does not reside, may be only refinanced without appraisal.

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