FHA Streamline Refinance- What exactly does that mean?
Definition of STREAMLINE
b : a smooth or flowing line designed as if for decreasing air resistance
A Streamline refinance refers only to the amount of documentation your lender will need for underwriting your loan (path of least resistance, better flow, see above definition), it does not mean that there is no costs involved in the transaction.
The basic requirements for an FHA streamline refinance are:
1. The mortgage to be refinanced is an FHA loan (FHA to FHA)
2. The mortgage is NOT delinquent, and previous 12 months payments made on time
3. The refinance will be lowering your monthly principal and interest and mortgage insurance payments by at least 5%.
4. No cash out is allowed when doing a streamline refinance (you may receive up to $500 cash back at closing )
There is always the option of doing a “true no cost” refinance (which means no out-of-pocket expense for you). This is when the lender may put you at a slightly higher rate of interest than the market rate (maybe .25%) on the new loan. From this rate premium the lender pays any closing costs that are incurred on the transaction (meaning they are not rolled into your loan balance). FHA does not allow lenders to include closing costs in the new mortgage amount of a streamline refinance, without you obtaining an appraisal).
Clear as mud? or a thick milk shake?~
~Until next time,