- Posted by: steve
- Category: mortgage articles, refinance
Want to refinance with less hassle? You may qualify for streamline mortgage refinancing. We’re giving you the scoop on what it is and if it’s right for you.
Trying to refinance, but can’t seem to wade through the tedious tasks? Streamline mortgage refinancing may be the answer to your problems!
What is Streamline Mortgage Refinancing?
Streamline mortgage refinancing is a method that simplifies the traditional refinancing process.
By requiring less paperwork and relying on the information that was submitted with your original mortgage application, the streamline mortgage refinancing process will not only save you money but also time and energy!
Why are there Fewer Requirements?
Basically, the borrower is already in trouble if they can’t repay the loan, regardless of their credit score, job status, or amount of income. This thought process allows for banks and lenders to offer a faster and easier mortgage process that could end up benefitting the borrower.
There are 3 requirements for any streamline refinancing option:
- The new loan must allow the homeowner to save a substantial amount of money.
- The cash pay-out that is often seen with traditional refinancing is not allowed.
- The homeowner must have an existing mortgage.
There are three different kinds of streamline refinancing options that you may benefit from.
But, before we delve into those, there are a few keywords and definitions you should be aware of.
- Mortgage: a legal contract between the bank/creditor and the homeowner that gives the bank/creditor the title of the homeowner’s property in exchange for a loan that will be paid back with interest. Once the debt is repaid, the homeowner receives their property’s title once again.
- Home equity: the market value of the homeowner’s interest in their property; it is the difference in the property’s fair market value and the homeowner’s outstanding balance on the property
Now that you’re familiar with the requirements and a few keywords, onto the different kinds of streamline refinancing options! Each one has different eligibility requirements and benefits, so be sure you look into them all!
1. FHA Streamline Mortgage Refinancing
The FHA, or the Federal Housing Administration, provides mortgage loans from approved lenders while also insuring these mortgages. FHA streamline mortgage refinancing is for homeowners who already have an existing mortgage with the FHA.
Benefits of FHA streamline mortgage refinancing include:
- No credit check
- No verification of assets or income
- No property appraisal
In order to be eligible for an FHA streamline mortgage, you must:
- prove the loan will lower your mortgage costs via lower interest and insurance rates or by switching from adjustable to fixed rates
- Pay all costs that do not include the current principal balance and the upfront mortgage insurance payment in cash at the time of closing
- Make 2 kinds of insurance payments
- a single upfront payment at closing
- an annual payment is broken into 12 monthly portion
Once you are provided with an FHA refinanced mortgage, the FHA will also provide insurance for it. Your mortgage insurance premium is determined by whether the original loan was endorsed before or after June 1, 2009.
Original Loan Endorsed Before June 1, 2009
For those whose original loan had been endorsed before June 1, 2009, you will receive a reduction to the upfront premium causing it to equal 0.10% of the new loan total.
In other words, the upfront mortgage insurance premium will equal $10 for every $100,000 borrowed. Plus, a reduction will also be applied to the insurance making the annual payments .55% of the loan total rather than .85%.
Original Loan Endorsed After June 1, 2009
For those whose original loan was endorsed after June 1, 2009, the upfront mortgage insurance premium will equal 1.75% of the total new loan.
In other words, for every $100,000 borrowed, you will owe $1,750 for the insurance premium. This amount will be automatically added to the loan balance.
However, not all of those refinancing will be paying the full amount of the insurance premium.
Rather, those who are refinancing within 3 years of the beginning of their original loan will be refunded their previously paid upfront mortgage insurance premiums.
The refund will diminish as time goes on, but the sooner you refinance with FHA, the better the refund and lower the loan total you will receive!
The guidelines of FHA streamline refinancing change on a regular basis, but as of April 28, 2017, these are accurate.
2. HARP Streamline Mortgage Refinancing
Created by the Obama administration, the Home Affordable Refinance Plan, or HARP, streamline mortgage refinancing option allows homeowners with existing mortgages to refinance regardless of the loan-to-value ratio.
If you are underwater with your mortgage, the HARP program could be your best bet!
The HARP follows the same basic guidelines as other refinance options including a smoother and faster process without appraisals and with much less paperwork.
But, in order to qualify for the HARP refinance option, the current mortgage must be from either Freddie Mac or Fannie Mae and have existed before May 31, 2009.
Other differences include:
- the loan cannot be used on the same property twice
- the owner must not have any late payments in the past 6 months
- the current loan-to-value ratio must be over 80%
If you meet these qualifications, the HARP refinancing program can help you immensely. With no underwater limitations, borrowers are able to refinance even if they owe twice as much as their home is worth.
Plus, for those who decide to refinance with loans that are shorter terms, there has been a reduction in risk-based fees!
But hurry! The deadline for getting a HARP streamline mortgage refinance is September 30, 2017!
3. VA Interest Rate Reduction Refinance Loan
For veterans, reservists, and those in the military who have taken advantage of VA mortgages, there is a streamline mortgage refinancing option just for you.
The VA Interest Rate Reduction Refinance Loan is commonly known as the VA streamline refinance loan. This option provides veterans, military members and reservists a simple and efficient to undergo streamline mortgage refinancing.
Unfortunately, the VA is not in charge of the interest rates. The banks and creditors who buy and sell mortgages remain in charge of them. However, the VA IRRRL does provide benefits that are not offered on other streamline mortgage refinance loans.
Some of these benefits include:
- The option for 100% financing without a down payment. The out of pocket costs will simply be rolled into the total cost of the loan.
- Changing lenders, as long as the new lender is VA approved and will offer a lower rate.
- The cash-out refinance options allow for longer periods of repayment and lower rates.
- Having the option of receiving up to $6000 cash in hand at the time of closing to use for energy efficiency improvements on the house (this money is to be reimbursed within 90 days of closing).
- The application is typically completed within one month.
- Applying without a Certificate of Eligibility– since it was used for your first loan, there is no need to submit it again!
- No max loan limit to worry about
To be eligible:
- You cannot have more than 1 late payment in the last year.
- You must be able to prove that the new payments will be lower.
- You need to be able to certify that you have been living on the property in the last 6 months or are currently– However, refinancing is possible on an investment property. The property owner must prove that the property was once occupied as a home, but it is not required to be a primary residence.
USDA Streamlined Assist Refinance Loans
Another program that offers minimal cost and fuss is from the United States Department of Agriculture.
The program was made public in 2012 and is meant to mirror other programs that have proved to be successful.
This process requires:
- The borrower must be an existing USDA direct or guaranteed rural homebuyer.
- The mortgage rate must be lower than the current one.
- More specifically the refinance must save at least $50 on the sum of your monthly payments for principal and interest, real estate taxes, and homeowners insurance.
- Borrowers named on the original notes must also be named on the new one. There cannot be any removal of names, but you can add names.
- For the last year, you must have made payments on your loan on time.
There are 3 types of USDA refinancing available and each option suits a different situation. Be sure you look into each thoroughly before choosing one to go with.
- USDA Streamlined-Assist Refinance
- Standard Streamline Refinance
- USDA Non-Streamline Refinance
Other advantages of USDA streamline refinancing
IN October 2016, the USDA reduced their fees meaning refinancing could lead to a reduction in your current fees. The reduction was seen in 2 places:
- Annual Fees: the annual fees were reduced from .50% to .35%
- Upfront Fees” the upfront fees were reduced from 2.75% to 1.00%
These reductions make a streamline refinance with USDA more affordable both monthly and upfront.
All refinances by the USDA are “rate-and-term” loans. This means that no cash can be taken out at closing.
However, the new options for refinancing have been saving homeowners a great deal of money every month, something for you to consider when that next bill comes around!
So, looking to refinance? We can help!
Take back control of your mortgage while getting the fastest approvals available.
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