March 28, 2013
FHA streamline refinance loans allow a borrower who has an existing FHA mortgage to refinance with no FHA-required credit check or FHA-required appraisal. FHA streamline loans work on the concept that the borrower has already qualified for the original FHA loan, so that qualifying data is used to get the home owner into the streamline refinance loan.
These loans have certain rules that apply which don’t necessarily apply to other types of refinancing. For example, the purpose of the loan can come under scrutiny–the borrower must, in most cases, get a reduced mortgage payment or interest rate as a result of the new loan. Additionally, FHA loan rules state:
“A transaction for the purpose of reducing the mortgage term must be underwritten and closed as a rate and term (no cash-out) refinance transaction”. According to FHA loan rules in HUD 4155.1 Chapter Six Section C, the loan to be refinanced must also be current. Chapter Six says:
“A delinquent mortgage is not eligible for streamline refinancing until the loan is brought current.”
Some borrowers want to know if they can refinance an existing FHA adjustable rate mortgage (ARM for short) to another ARM loan using an FHA streamline loan. FHA rules in these circumstances are clear;
“An Adjustable Rate Mortgage (ARM) may be refinanced to another ARM, provided that there is a net tangible benefit to the borrower.” ARM to ARM loans can only be made for principal residences.
FHA borrowers can also refinance existing FHA ARM loans to fixed-rate mortgages. In these cases, the rule that there must be a lower interest rate may not apply because the ARM loan may have a lower rate at the time of the loan than the fixed rate mortgage. More information on that issue and others like it can be found on the FHA official site at www.FHA.gov.
Do you have questions on FHA refinancing loans? Ask us in the comments section.
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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