I know that sometimes FHA home loans get a bad rap because of the mortgage insurance premium, but there are benefits that go far beyond that of simply being easier to qualify.
FHA home loans have a built in benefit of allowing you to reduce the interest without having to go through the expense and paperwork of the entire home loan process again.
I know, I know…I’m usually the first one to call B.S. when something sounds too good to be true – so I want to make sure I emphasize that it is a much easier process, but of course there is still a little bit of paperwork.
What’s the Catch?
That’s just it – there really isn’t one. There are a couple of things you should be aware of though.
No Cost Streamline – There are minimal costs to doing a FHA streamline refinance that the lender will pay for. The way the lender pays for these fees is by offering you an interest rate sufficient to “cover the cost“.
Example: If you currently have a 5% interest rate, a lender may be able to offer you a “no cost streamline” at 4%. That’s pretty good right? Should save you a ton over the long haul. The reality of this scenario is that if you were to come in with the reduced fees associated with a streamline, you may be able to push that interest rate down under 4%. Pretty cool huh?
What you can expect with a FHA streamline refinance
Paperwork: Different lenders may or may not require all of this paperwork. As a direct lender offering this program, here is what we ask for from the home owner
- Disclosures – Credit authorization and signed 4506T
- Current/Complete Bank statements verifying ability to cover costs to close (if there are any costs)
- Loan Application – This is the same application you completed last time you applied for a loan
- Mortgage payment coupon/statement – Your most recent mortgage statement
- Homeowner’s insurance declaration page or agent’s contact information
- Copy of Driver’s and Social Security card
- Copy of Recorded Deed (we can get this from the title company if you can’t find it)
- Copy of the BMCD 1 closing statement from Purchase/last refi – You cannot have modified the loan since last finance.
I know that seems like a hefty list, but it’s really not. Most importantly is what you DO NOT have with a FHA streamline refinance…..No Appraisal! Yay 🙂
I am sure there are many lenders out there bombarding you with refinancing opportunities, it’s annoying – I totally get that. Just don’t let that discourage you from looking into this option if you have a lender you can trust.
If you’re in California, I’m happy to run the numbers to see if you can save a few bucks. If you’re outside California, drop me a quick comment below and I may be able to recommend someone I trust.
The bottom line on this is that there’s no cost to explore this opportunity and if you cannot realize at least a 5% improvement in payment, FHA will not allow you to refinance. Win/Win.