Loans must be current at the time of closing. The FHA requires that borrowers make six mortgage payments on their current FHA-insured loan, and that days pass from the most recent closing date, in order to be eligible for a Streamline Refinance.
For instance, say a homeowner has an FHA loan opened in May with a rate of 4. The homeowner looks into a Streamline Refinance, and receives a rate quote at 3. The new combined rate would be 4. This FHA refinance would be eligible. Another allowable Net Tangible Benefit is to refinance from an adjustable-rate mortgage to a fixed-rate mortgage.
This is considered a benefit because fixed-rate mortgages have predictable rates and payments that carry less risk of default. For non-credit qualifying Streamline loans, there is no verification of employment, nor are there paystubs, W-2s or tax returns required for approval.
Instead, it uses payment history as a gauge for future loan performance. This means that FICO scores below , below , below , and even below could be eligible for Streamline Refis. Some lenders, however, create their own minimum requirements.
The maximum mortgage amount on your new loan is equal to your current principal balance plus your upfront mortgage insurance premium. All other costs — including origination charges, title charges, and prepaid taxes and insurance — must be either paid by the borrower as cash at closing, or credited by the loan officer in full.
But you pay a higher interest rate in exchange. If that amount is larger than your current loan balance, you take the difference in cash. Homeowners can use these funds for any purpose: to pay off debt, improve your home, or create an emergency fund. As shown in the chart above, those using an FHA Streamline within three years of their original loan stand to get an upfront MIP refund. This can significantly lower the amount of UFMIP added to your new loan and reduce the amount you have to pay overall.
Only homeowners with a starting loan-to-value ratio of 90 percent or less can cancel mortgage insurance after 11 years. Refinancing homeowners could also bring cash to closing to reduce their loan balance and change their MIP disposition. However, not everyone will have the cash to make such a move. This is why, when exploring an FHA Streamline Refinance, you should also look at other mortgage refinance options including conventional mortgage loans via Fannie Mae or Freddie Mac.
This insurance premium on FHA mortgages is refundable under a specific set of refinance loan circumstances, but not for all loans. HUD Many borrowers also want to know if this insurance requirement is factored into calculating mortgage loan limits and loan-to-value limits. This insurance money protects the lender in case the borrower defaults on his mortgage payments. UFMI can be paid at the time the loan closes or rolled into the mortgage payments.
It is in addition to ongoing mortgage insurance premium payments. Article Sources. Investopedia requires writers to use primary sources to support their work.
These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. If a borrower defaults, the FHA pays the lender. FHA k Loan An FHA k loan provides money for purchases, repairs, and other related expenses for individuals who want to buy and rehabilitate a damaged home.
Minimum Down Payment A minimum down payment is the minimum cash contribution that must be made by a borrower toward the purchase of a home in order to qualify for a mortgage. Closing Costs Closing costs are the expenses, beyond the property itself, that buyers and sellers incur to finalize a real estate transaction. Partner Links. Related Articles.
Mortgage HUD vs. Learn about our editorial policies. Published July 27, Pros Makes it easier to qualify for a mortgage Lower down-payment requirements.
Cons Additional upfront cost required Still required to pay an annual mortgage insurance premium. Article Sources. Your Privacy Rights. To change or withdraw your consent choices for TheBalance. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.
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