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Streamline Refinance

An FHA Streamline Refinance loan is designed for people who simply want to refinance their mortgages in order to obtain a more favorable interest rate than they have on the original mortgage.  In order to qualify for this program your original mortgage must also be FHA insured.

The term streamline refers to the minimal underwriting and paperwork required of the lender.  An appraisal is not required for one of these mortgages; in that case, however, the loan must not be larger than the original loan.

A Streamline refinance, aka refinance, must be on a mortgage for which the payments have been kept current.  The new loan must lower the monthly payment of principal and interest.  The borrower can take a maximum of $500 out in the form of cash for equity.

The Streamline FHA refinancing loan is limited to thirty years or the remaining term of the original loan plus twelve years – whichever figure is lower.   Streamline refinancing cannot be used to refinance a fifteen year mortgage into a thirty year mortgage.

The lender can help finance the closing costs in one of two ways.  The interest rate can be raised to help cover closing costs, or they can be built into the loan if there is sufficient equity in the property.  If the borrower wants to finance closing costs, however, an appraisal of the property is required.

It is up to the borrower to shop for the best deal – and an important part of that deal is the amount of closing costs and the manner in which they will be paid.  The goal of a straight refinancing loan is to lower the interest rate and the monthly payment.  Financing the closing costs is going to cut into those goals somewhat, although many homeowners aren’t going to have the several thousand dollars required to close most home loans.

The FHA has engaged in Streamline FHA refinancing since the eighties.  This program is not new to the marketplace; it just hasn’t received all the noise that has surrounded some of the more exotic commercial refinance offerings.  loans of any stripe are going to be inherently conservative with protection for the borrower built in.