Refinancing Your FHA-Insured Mortgage
11.20.17
What is an FHA Streamline Refinance Program?
If your mortgage was issued by federally qualified lenders and insured by the Federal Housing Administration (FHA), the FHA streamline refinance program can be a great deal for you. Streamline refinancing was created to help low-moderate income families pay off their mortgages sooner at a lower rate. Sounds great, right? Well it certainly can be, but there are some things to consider first. Mortgage lenders like to put restrictions and interest fees on loans that are not in the streamline program. It is always a good idea to shop around and compare before choosing a lender to go through. Mortgage Options, Inc. provides loans through various lenders so we can do the shopping for you, and answer any questions you may have.
The FHA streamline refinance program does have a lot of benefits. Unlike other mortgage refinance options, this program offers borrowers with an existing FHA mortgage a new FHA-insured home loan without requiring an appraisal or any documentation of income or assets. Furthermore, depending on when the current loan was taken out, lower mortgage insurance fees may be available to the borrower. If you took out your mortgage prior to June 1, 2009, you pay a 0.01% fee, a massive difference for those after that date, pay 1.75% interest. Therefore, with the higher rate, refinancing will still have a higher rate for you and may not be the best deal. Be sure and talk to an expert about your options.
Is the FHA Streamline Refinance Program right for you?
All that being said, the FHA streamline refinance can potentially help you save money. So here are some things to consider.
Do I qualify?
The FHA has some guidelines for using their refinance program. Your current mortgage must be FHA-insured. You must have made on-time, in-full mortgage payments for the past 12 months. Your FICO credit score has to be at least 620 or higher. You cannot have refinanced within the past 210 days. If you meet all these requirements, then you can start looking into lenders and rates. Different lenders have different loan requirements, so even if one lender turns you down, another may be willing to work with you. Homeowners with an FHA loan taken out before June 1, 2009 may benefit the most from the FHA streamline refinance program because of the lower interest rate, but even those with more recent loans should compare their current monthly payments with their payments under a refinance.
What are the advantages?
It’s easy to get approved. Other refinancing options can have credit score qualifications and house appraisals. The FHA refinancing options are designed to help lower income families and have fewer restrictions. No appraisal is required, even if you owe more on your mortgage than your home is worth. However, some lenders to require appraisals, even though the FHA says it isn’t necessary. And, of course, refinancing can lower your payments and help your loan be paid off faster.
What’s the downside?
Mortgage Insurance can get costly. When you refinance your FHA loan, you pay upfront mortgage insurance and sometimes annual premiums. This increases your loan balance and your monthly payments. If you took out your loan after June 1, 2009, your premiums will be higher on your new loan.
Closing costs cannot be included in your loan balance. Even though this total is different for everyone, average closing costs are approximately 3% of the loan amount. Some lenders will allow you to use a “zero cost refinance” option where you can wrap closing costs into your loan balance or pay them with cash. While “zero cost” sounds like a great option, what this actually means is that you must pay a slightly higher interest rate over the life of your loan to reimburse the lender-paid closing costs.
Let Mortgage Options, Inc. Help You
If you have an FHA-insured mortgage approved before June 1, 2009, refinancing to a lower interest rate with an FHA streamline refinance will probably save you money. But even if your mortgage was approved after that date, it’s worth talking to a loan officer at Mortgage Options, Inc. to see what your options are. Even though it’s relatively easy to qualify, you may still need to shop around for a loan approval if your home equity is low or you have credit challenges. Mortgage Options, Inc. can do the shopping for you as we have loan products from various sources. Either way, the effort is worth it and could lead to thousands in annual savings.
Talk to Mortgage Options, Inc. today and schedule your free consultation to discuss your options and what would work best for you. We will take the time to answer your questions and look at your unique situation. There are always options, and even if the FHA Streamline Refinance Program isn’t right for you, we’ll help you sort through your choices, bringing you a step closer to being debt-free.