Articles & Tips
Save Money with Streamline Refinance
If you are a homeowner who is fortunate enough to hold a mortgage through the programs administered by either the Federal Housing Administration (FHA) or the Veteran's Administration (VA), you may qualify for a streamline refinance that will result in lower monthly payments. The streamline refinance program is a unique and attractive feature of VA and FHA mortgages that can save you time and money as compared with the conventional mortgage refinancing process.
Unlike most mortgage refinances, a streamline refinance does not require a credit check, appraisal, or income verification. The streamline refinance program operates under the assumption that if a homeowner can qualify for their current mortgage, they most certainly can qualify for one with a lower monthly payment. A streamline refinancing lowers the monthly loan payment either through a lower interest rate, by extending the length of the loan, or both.
One catch with a streamline refinance from either the FHA or the VA is that you cannot take cash out based on accumulated equity. If you need cash out from the refinance, the house will need to be appraised, your income will need to be verified, and the transaction turns into a more conventional refinance process.
Another requirement in order for a homeowner to qualify for a streamline mortgage is that you need to be current on your mortgage payments. In addition, you must have had no late payments for the preceding twelve months.
The FHA and VA streamline refinancing particulars are almost identical, with just a few minor differences. With a VA streamline refinance, the Department of Veteran Affairs charges a funding fee that ranges from 0-3.3% of the loan amount; the percentage depends on your current Veteran status. With an FHA streamline refinance, a mortgage insurance premium (MIP) must be paid at closing; the amount is often around one and one-half percent of the loan amount. If the original FHA mortgage is less than 36 months old, then a portion of the original MIP amount you paid previously will be refunded to you.
The fees that are specific to a FHA or VA streamline refinance are dwarfed by the savings in not having to pay for appraisals, credit checks, and other processing fees. In addition to savings on fees, the streamline refinancing process moves along much more quickly than a conventional refinance transaction. Homeowners who qualify for streamline refinancing consider themselves to be the luckiest participants in the mortgage marketplace.
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