What Every Massachusetts Homeowner Should Know About FHA Streamline Refinance Mortgages

What Every Massachusetts Homeowner Should Know About FHA Streamline Refinance Mortgages

Few Massachusetts mortgage borrowers know this, but the Federal Housing Administration (FHA) allows streamline refinances on FHA mortgages and has been since the early 1980s.
The word “streamline” refers to the fact that this particular form of home loan refinance involves a significantly smaller amount of red tape and paperwork than the more typical refinances.
Basic requirements of the FHA streamline refinance are:
• The mortgage to be refinanced should be an FHA insured loan.
• The mortgage to be refinanced should be current.
• The refinance must benefit the borrower by lessening the borrower’s interest payments and monthly principal.
• No money can be taken out of the existing equity on refinanced mortgages through a streamline refinance.
Benefits of an FHA Streamline Refinance
• Appraisal may not be required
• Reduced Documentation
• No income verification, credit check, underwriting fee or employment verification
• Easily decrease or increase the period of the term of the existing mortgage loan • Benefit from low interest rates
• Very little, even zero, other expenses involved
Massachusetts home owners who elected to go with FHA Streamline Refinance did so because the refinance is also available with zero out-of-pocket expenses.
The zero-out-of-pocket option takes place in one of the following two ways:
1. The expenses, if any, can be covered by the lender in return for a slightly higher interest rate.
2. As an alternative, the expenses may be added to the new loan, provided the property has enough equity to cover the additional amount.
Lenders handle FHA Streamline Refinance mortgages in different ways…
Out-of-Pocket Mortgage Costs Covered by Increasing the Interest Rate
Few lenders give “no cost” refinances i.e. zero out-of-pocket costs to borrowers. This is done by increasing the interest rate slightly on the loan. With this premium, your mortgage lender will typically cover any closing costs required as part of the transaction.
All out-of-Pocket Mortgage Costs Covered by Increasing the FHA Mortgage Amount
Lenders may allow borrowers to pass on paying out-of-pocket expenses by folding the closing expenses into the next mortgage value. This is done only if there is enough equity in your property, as determined by the FHA appraisal.
Please note, FHA Streamline Refinances may be done without an appraisal, but in these cases – the new loan value must be the same as the original loan value. (No increase to existing loan amount)
Note: Investment properties (properties where the borrower no longer occupies as his or her full-time primary residence) can be refinanced via the straight FHA Streamline Refinance process only. In these cases, out-of-pocket expenses must be paid by the borrower.
Interested in an FHA Streamline Refinance? Call me at 800-941-5616 or apply online, and I will review your scenario with you. Ask for or mention Jeff Drew.