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A Look at FHA Simplified Refinancing

What is an FHA Streamlined Mortgage Refinance? Standard FHA refinance loans have been available to current and prospective homeowners since 1980, and today these loans account for about 20 percent of all home loan refinances.

In addition to these, FHA streamlined refinances are available to homeowners who already have an FHA loan. It allows them to lower their interest rate and/or change the terms of their existing loan without much of the hassle associated with other refinancing transactions. The amount homeowners can refinance with the enhanced option depends on their income, monthly expenses, and credit history (although FHA is flexible when it comes to credit requirements).

FHA Enhanced Refinance Facts

FHA Streamlined Refinance Loans are described as “streamlined” due to their fast processing and reduced paperwork. To be eligible for this type of refinancing, the borrower’s existing mortgage must be current with no past-due payments in the last year.

The simplified refinance does not offer a cash-out option and the new loan must reduce the homeowners’ monthly payments or shorten the term of the loan.

Closing costs associated with this type of refinancing can be paid for in a number of ways. The owner can choose not to have closing costs, but this may result in a higher rate than would otherwise be available.

If there is enough equity in the home, the homeowner may choose to include closing costs in the new loan amount, instead of paying them out of pocket or taking a higher rate. In this scenario, an appraisal will be necessary to document the current value of the home. If an appraisal is not done, the new loan amount cannot exceed the original loan amount.

FHA Enhanced Refinance Qualifications

With a streamlined refinance, the only credit qualification is no delinquent mortgage payments for at least twelve months. The homeowner also does not have to verify your income or employment status.

FHA offers two other refinancing options: cash withdrawal and debt consolidation. For these options, it does not matter what type of loan the homeowner currently has. There are credit qualification requirements, but they are flexible.

FHA is discussing possible changes to the program, including increased mortgage insurance and stricter credit score requirements, so now may be a good time to investigate your options. Talk to an FHA-certified loan specialist to learn more about FHA refinance options and how to apply.