November 9, 2011
FHA insured loans have been eligible for Streamline Refinancing since the early 80s. According to the FHA official site, there are some common misconceptions about Streamline Loans that FHA borrowers and home owners should know before applying for these refinancing loans.
For example, “Streamline” refers to the reduced amount of paperwork, qualifying requirements and other details involved in these mortgages. It does not mean there are no costs to the borrower or that no money will be paid out of pocket for an FHA Streamline mortgage. Borrowers do have the option of including costs of the loan into the mortgage, but that can seriously change the way the loan is handled if including those costs increases the loan amount too much.
What are the basic requirements for an FHA insured Streamline Refinancing Loan? For starters, the current loan must be FHA insured. Streamline loans aren’t designed for conventional mortgages. The basic idea behind a streamline type loan is that the borrower has already qualified for the current FHA loan, so there’s no reason to re-qualify the borrower as long as all mortgage payments have been made on time within the Streamline Loan rules for new applicants.
Streamline loans must lower payments or interest rate, there’s no cash back on the loan, and the loan can feature a certain amount of money for energy-efficient improvements or upgrades to the home. When it comes to a Streamline Loan where the borrower wants to include closing costs and other permitted expenses into the loan amount, the FHA requires there to be “sufficient equity in the property, as determined by an appraisal.”
FHA adds, “Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed the original loan amount. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal.”
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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