It is important to know the FHA streamline requirements when trying to refinance. Be sure to shop around for current refinance rates.
Q: I have an FHA loan for my house and I was wondering if this is a good time to refinance. I am current on my mortgage and my home value is higher than the money I owe.
A: Refinancing an FHA loan should be pretty easy. You will want to ask your lender specifically for an “FHA streamline refinance.” These loans do not require the lender to do an appraisal or to verify your income. All you’ll have to do is pay a couple of hundred dollars and essentially the lender just lowers the interest rate. None of the loan terms, including the number of years left on your loan, should change. It’s just about lowering the interest rate.
Sometimes we find that lenders seem not to have heard about the FHA streamline refinance. This is disingenuous of them, and we’ve found that when lenders do this, what they’re really doing is telling you they don’t want your business. Instead, you’re better off shopping around for another lender who is more willing to help.
The best place to go for information is to the source: The department of Housing and Urban Development (HUD) has an excellent portal, called portal.hud.gov. The specific link you want is http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/buying/streamli.
The basic requirements for an FHA streamline refinance are as follows: The mortgage must already be FHA insured; you must be current on your payments; the refinance must result in a lowering of the borrower’s monthly principal and interest payments or, under certain circumstances, the conversion of an adjustable rate mortgage (ARM) to a fixed-rate mortgage; and, you cannot do a cash-out refinance.
HUD suggests you start by calling your lender, but you should shop around to find the best deal on interest rate, costs and fees. And if the deal doesn’t seem good enough, either take a pass or call more lenders.
While the best deal for you might still be to keep your FHA loan, you might also want to see where the competition stands on non-FHA loans. Depending on the amount of equity you have in your home, you could find a better interest rate with a non-FHA loan. But be careful, you need to make sure you understand the loan terms offered to you. Don’t just look at the monthly payment offered to you, you need to understand the interest rate given to you, the costs to refinance, the length of term of the new loan, and whether the new loan is a fixed rate or a variable rate loan product.
Thanks for your letter.