FHA Loan Articles
Cash Back, Closing Costs and FHA Streamline Loans
- You must have a current FHA loan with no late payments or delinquency notices for at least 12 months.
- Your refinancing should be accomplished to get lower mortgage and interest payments.
- The refinancing process requires verification of employment, but proof of income is not required.
- To be approved for an FHA Streamline loan, your original mortgage must be at least six months old.
There is no cash-out option with FHA Streamline loans. Some banks may advertise these loans as a way to get money to do home improvements, save for college funds or other personal projects; when you read more closely you will learn these references are about the extra money you have left over because the Streamline loan lowered your monthly bills. There's no lump sum available with a Streamline loan--the FHA's stated purpose for this program is to help homeowners with existing FHA loans lower their monthly payments.
Before you can get lower payments, you need to apply for the FHA-insured Streamline loan, get approved for the loan (with a no-credit check process), then close the deal.
As with your original FHA loan, you are required to pay closing costs. These costs will be explained by your loan officer and included in the terms of your loan. Your closing costs and how they are paid may be affected depending on whether you choose a "no appraisal" streamline loan or opt to have your home re-appraised. No appraisal loans are good for those willing to pay the closing costs up front and out-of-pocket.
You may also choose a "no cost" refinancing loan. What does "no cost" mean? The borrower is charged a higher interest rate to have closing costs included into the mortgage loan.
You can choose to have the closing costs built into your loan, but you must have the property reappraised. You can only roll the closing costs into your new FHA Streamline loan if there's enough equity in the property to cover the additional amount.
FHA Streamline loans can get into lower mortgage payment and better interest rates; your payments will drop and you'll have more money left over to save, pay off bills or invest. If you've been paying on your current FHA mortgage for at least six months, ask your loan officer how an FHA Streamline refinance loan can lower your bills.