Lower Interest and Mortgage Payments: Streamline Refinance

March 4, 2013

In the last part of 2012 and the early parts of 2013, mortgage loan interest rates have been reported at lows not seen in many years, causing many FHA borrowers to think about refinancing an existing FHA home loan--even if they have already refinance a home loan in the last few years.

Refinancing is especially popular for some in the wake of the "fiscal cliff" crisis at the end of 2012. Even though that issue was avoided at the last minute, the agreement reached has not stopped many from experiencing higher payroll taxes, the reduction or elimination of certain tax breaks, and in some cases a higher cost of living.

Which leads many to ask whether now the right time to pre-qualify for an FHA refinance loan or apply for FHA streamline refinancing in order to offset these higher taxes and other issues. While that is a decision that only the borrower can make, an FHA borrower who needs lower interest and/or monthly payments should consider an FHA streamline refinance loan.

What are the features of an FHA streamline refinance? The FHA official site, FHA.gov, describes them as being:

."designed to lower the monthly principal and interest payments on a current FHA-insured mortgage, and must involve no cash back to the borrower, except for minor adjustments at closing that are not to exceed $500." One of the benefits of a streamline refinance includes the fact that FHA loan rules don't require an appraisal."

FHA.gov adds, that the lender is free to require an appraisal, "but the FHA does not insist on a new appraisal. Additionally, "FHA does not require repairs to be completed on streamline refinances with appraisals, with the exception of lead-based paint repairs. However, the lender may require completion of repairs as a condition of the loan."

What happens in situations where the lender does require a new appraisal? FHA loan rules state, "If an appraisal has been performed on a property, and the appraised value is such that the borrower would be better advised to proceed as if no appraisal had been made, then the appraisal may be ignored and not used, and lender must notate this decision on the HUD-92900-LT, FHA Loan Underwriting and Transmittal Summary."

Because FHA Streamline Refinance loans for FHA mortgages do not permit cash back to the borrower, the FHA requires no further underwriting requirements than a few basic forms needed to get the loan moving. However, the lender is free to require additional underwriting, especially if there are circumstances where the new loan may actually result in higher payments or higher interest rates.You can learn more about these issues by speaking with a loan officer, or you can contact the FHA directly by calling 1-800-CALL-FHA.