Homeowners with an existing an FHA mortgage may have a much easier time refinancing their loan, even if they are underwater or experienced employment disruptions the past few years, all part of the expanded FHA Streamline refinance program.
FHA recently changed it's underwriting guidelines, opening the door for potentially millions of existing FHA borrowers to lower their interest rate from the mid-6.00% range down to the low-4.00% range for a 30 year fixed rate mortgage.
The Streamline refinance is designed to be quick and easy, relying less on income, employment, and credit and more on a tangible net benefit to the homeowner. Translated into English, that means saving money on a monthly and annual basis.
There are three primary requirements for the FHA Streamline:
- Refinance must have economic benefit (lower payments, converting ARM to Fixed).
- Last 12 months paid on time.
- No cash-out.
Here's a common FHA Streamline scenario I've had the past few months:
- $225,000 (took out in 2006) $200,000 (New Loan)
- 6.75% 4.00%
- $1459/mo PI $954/mo PI
Borrowers will still have their monthly mortgage insurance included in their payment if they have less than a 78% Loan To Value ratio (mortgage balance / home value).
All in all, the expanded guidelines should be a significant benefit to existing FHA borrowers and will likely improve the FHAs loan performance, as more and more borrowers will be able to make the lower mortgage payments.
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