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Fha Streamline Refinance Closing Costs
In addition to the fees listed below, qualifying borrowers are also required to prepay some expenses like taxes and homeowners insurance. Though, the borrowers current lender typically sends a refund of a similar amount when the loan closes. This means the net cost for borrowers is often close to zero for prepaid items.
*This is a list of possible fees for an FHA streamline refinance. While not an all-inclusive list, it should give you an idea of general closing costs.
Your loan could require higher or lower fees depending on the lender, the loan amount, and your credit score among other loan factors. The only way to get an accurate estimate is to get a Good Faith Estimate from a lender to see their quoted costs. Once you get this estimate from at least two lenders, then you can start to negotiate your fees.
While these costs may seem large, keep in mind the amount of money the lender collects in SRP at closing this gives the borrower power to negotiate.
Qualifying With No Credit History
Ideally, you want at least a year of reliable payments before you apply for an FHA loan. It is important to know that a lender may not reject an application simply because the applicant chose not to use credit in the past. No matter if you have traditional or nontraditional credit, your FHA loan officer will look into it when you apply.
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Pros And Cons Of Fha Loans
Like any financial product, FHA loans have pros and cons.
- No requirement for large down payment. FHA loans are famous for requiring down payments as low as 3.5%. This might be the single biggest contributing factor to FHA’s importance in helping to realize the dreams of home ownership to less-than-qualified households.
- No requirement for high credit scores. As a matter of fact, the FHA approves loans for households with credit scores of 580 or even lower.
- No prepayment penalties.
- No expectation for income must be met. As long as borrowers can show that they can repay the loan , even the lowest income households can qualify.
- Certain scenarios where FHA loan borrowers are allowed to spend up to 57% of their income on all monthly debt obligations, which can be considered exceedingly high compared to the debt-to-income ratio requirements of other mortgage loans.
Not only do they have very appealing incentives for borrowers, but for certain mortgage lenders also because they are a federal entity upheld by tax dollars, FHA loans basically guarantee the ability to take over any remaining loan payments when borrowers happen to default.
With as many benefits as they come with, there are reasons why they haven’t been adopted as the universal method for mortgage loans.
Improve Your Homes Curb Appeal
Curb appeal doesnt always translate to a higher home value in a formal appraisal. However, curb appeal has a huge effect on buyers when they visit a home for the first time. So when you compare a handful of homes with similar square footage in the same neighborhood, curb appeal pulls more buyers and generates higher interest. In short, strong curb appeal leads to better offers when youre getting ready to sell your home in Oakbrook Terrace, IL.
Landscaping is the path to your front door. Make sure to tidy up the yard, plant some seasonal flowers, keep the grass maintained and freshen up any ground cover. Larger expenses might be fixing walkways or driveways or adding more substantial landscaping. The goal is to get a buyer to stop and shop!
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Streamline An Fha Loan
Locate your original FHA loan file, including your application, title insurance policy, and conveyance documents, including the. The FHA streamline process will reuse most of this paperwork, saving you time and money.
Verify that current interest rates are lower than your existing FHA loan interest rate. You can only streamline if you will lock in a lower interest rate.
Identify several HUD-approved mortgage lenders in your area. The reference link provided below can lead you to approved lenders in your area.
Contact at least three HUD-approved lenders to obtain a good faith estimate on streamlining your FHA loan. Lenders do not always charge equal closing costs and transaction fees, so contacting several approved lenders can help you to identify a low-cost provider.
Select a lender and provide him with your original FHA loan application. Because of the streamline process, your lender will have very little work to do and you should be able to close on your new loan within about one week.
Attend a closing with your lender. This is where you will sign new documents, including a new promissory note and mortgage, sometimes called a âdeed of trustâ instead of a mortgage.
Fha Streamline Refinance Qualifications
You can use a streamline refinance for a primary residence, secondary residence or non-owner-occupied residence. You must be current on your mortgage and have made all payments due in the last six months, though the FHA does allow you some grace if no more than one payment was 30 days late.
You must wait 210 days from the closing date of your existing FHA loan to become eligible for a streamline refinance. The new loan must help you financially in some way: by switching from an adjustable-rate mortgage to a fixed-rate loan, shortening your loan term or lowering the combined rate of your mortgage and FHA insurance premiums.
For example, if youre moving from one fixed-rate loan to another, the FHA requires that your new combined rate be at least 0.5 percentage points lower than your existing rate. If your interest rate is 4% and your mortgage insurance rate is 0.85%, and you could refinance at 3% with a 0.85% mortgage insurance rate, youll meet that test.
If youre moving from an ARM to a fixed-rate loan, however, your combined rate is allowed to increase by up to 2.0%. Having a fixed-rate mortgage offers greater financial stability and protection against an ARMs future interest-rate increases, so the FHA doesnt require your new combined rate to be lower.
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Make Sure You Benefit
The final requirement for the FHA streamline loan is that you benefit from the refinance in some way. The benefit is usually a lower payment. If you save money each month, its easy for the lender to approve you for the loan, especially if you have a history of making the higher payments on time.
You dont have to save money to benefit from the refinance, though. Some borrowers benefit from refinancing out of an ARM into a fixed rate loan or reducing the term of their loan. As long as you can prove that you benefit in some way, you will satisfy this requirement.
Preparing for the FHA streamline loan is much easier than preparing for your original FHA loan. The application process and the underwriting are much easier when you need the FHA streamline refinance. As long as you make sure that you have a timely mortgage payment history and that you benefit from the mortgage in some way, you should be able to find a lender willing to give you the loan.
Other Fha And Conventional Loan Resources
Learn more about your FHA home loan options. If a conventional loan better fits your needs, MoneyGeek can help you learn more about this option, too.
This helpful page details various FHA refinance requirements. It also offers an FHA refinance calculator, which analyzes loan costs and potential savings, helping you decide if refinancing is right for you.
How to Apply for an FHA Loan
Your mortgage application is the story of your financial life, and the better you are at telling this story, the higher your chance for loan approval.
This application crash course is the only guide youll need to apply for an FHA home loan. By breaking down a complicated process into manageable, small phases, MoneyGeek makes it easy.
Step by step, youll learn how to document your income, assets and other qualifications, and complete the mortgage forms.
You stay in your comfort zone, without the pressure of being in a lenders office, while experts walk you through the FHA application process.
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Qualifying For An Fha Streamline Refinance After Mortgage Forbearance
What if youve taken advantage of mortgage forbearance, as many people have due to the pandemic or another presidentially declared major disaster? Dont count yourself out. Instead, see which of these situations applies to you:
Mortgage Lenders And Streamline Refinance
Many different banks and mortgage lenders offer streamline refinancing opportunities for qualified customers. That being said, it is important to differentiate between a lenderâs own refinance products and those associated with the FHA, VA or HARP. Not every bank is licensed to offer these types of mortgage products, and it may be necessary to review a variety of lenders before finding the one that best suits your situation. Some may have more experience with FHA or VA refinance, while others may specialize in HARP loans. It is also worth noting that approval for any of these programs is entirely left to the discretion of the lender, so it may be necessary to shop around before finding a bank, credit union, or other mortgage lender that can offer the most suitable refinance product for your specific situation.
While streamline refinancing through the FHA, VA, and HARP programs provides an easier path to a new mortgage, it does not necessarily guarantee lower interest rates or reduced loan costs. In some instances it may be more beneficial to go with a traditional refinance, even though the process of application can be more time consuming. As with any mortgage product, it is important to review your options and look for a lender who can offer a refinance package that will that will do more than simply save time, but will also save you money over the life of your new loan.
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How To Apply For An Fha Streamline Refinance
To apply for an FHA streamline refinance, youll first need to find an FHA-approved lender. While you can use your current FHA lender, it pays to shop around, as loan requirements and fees vary from one lender to another.
Youll also need to gather some documentation. Even though minimal documents are required for an FHA streamline refinance, there are still a few essentials youll need. These can vary by lender, but here are the basics to keep on file:
- A current mortgage statement to show that payments are up to date
- A current FHA mortgage note to show your interest rate and payment
- Homeowners insurance information
- Two months of bank statements to prove you have enough funds to pay for out-of-pocket costs
When shopping around, remember that there are costs associated with this type of refinance. Youll have to pay the upfront MIP in addition to monthly premiums. FHA loans originated before June 2009 require an upfront premium of only 0.01 percent. All other loans require an upfront premium of 1.75 percent of the loan amount. Annual premiums are equal to 0.45 percent to 1.05 percent of the loan amount each year of your loan term.
Talk To Us About Fha Streamline Refinance Rates
The FHA rate we offer you may be higher or lower than rates you see advertised online. Current market conditions, your income and personal credit, and the amount borrowed may have an impact on the rate you receive. Ask us today about the competitive FHA streamline refinance rate you might get from Freedom Mortgage.
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Fha Streamline Loan Borrowers Arent Hindered By Closing Costs
Even though the FHA streamline refinancing program doesnt allow closing costs to be rolled into the new loan amount that doesnt mean borrowers have to pay those fees out of pocket the high demand for FHA loans gives mortgage lenders more leeway to negotiate a lower rate and fee structure. With mortgage interest rates at historic lows, nows the time to refinance your FHA loan and reduce your mortgage payments. Theres no reason to be paying more for your home loan than necessary and that includes closing costs to refinance.
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Eight Factors To Help You Qualify
Lenders understand that some things are simply out of your control, but there are several things you can control and you should be mindful of them when youâre waiting to qualify or close on your FHA loan.
- Donât make any random deposits into your bank accounts, and document each one when you make a deposit.
- If you have more than one bank account, donât transfer big amounts between them. Keep most of your money in one account if possible.
- Wait to buy a new vehicle or to upgrade to a bigger lease.
- If you get a cash gift, remember to fill out your gift paperwork before you accept it.
- Donât quit or switch jobs in the middle of the loan process. You want lenders to see you as a good choice.
- If you work at a salaried job, donât switch to a heavily-commissioned job. Remember, your loan paperwork is based on your previous income from your salaried position.
- Donât fall behind on your bills or miss payments, even if youâre currently disputing them.
- Even if you get 20% off, donât open any new credit cards. This can skew your credit utilization ratio, and it can make your credit score drop.
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Homebuyers May Qualify For A Low
Visit FHALoans.com today to prequalify.
* U.S. Department of HUD as of August 15, 2019. Originations based on beginning amortization dates.
# Includes all conventional and government single family forward originations. Mortgage Bankers Association of America, âMBA Mortgage Finance Forecast,â August, 2019.
In March of 2019 the FHA announced tightened underwriting standards, which is expected to impact about 4% to 5% of the demand for FHA-insured loans, leading to somewhere between 40,000 and 50,000 fewer loans a year.
Get Current Fha Loan Rates
For your convenience current FHA loan rates are published below. You can use these to estimate your mortgage interest rates and payments.
|Varies by County Limits
|15-yr & 30-yr Fixed
To better compete with government insured loans, both of the major GSE have launched low downpayment loan options.
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When Should I Refinance An Fha Loan
If interest rates are now lower than what you currently pay on your FHA loan, it may be time to consider refinancing. A good gauge is if you can lower your rate by at least half a percentage point.
An FHA refinance can also be a good idea if you want to get out of paying mortgage insurance premiums. You can do this by refinancing your FHA loan to a conventional loan. Youll need to meet the credit requirements for a conventional loan, however.
Figure Out How You Will Pay For Closing Costs
The term refinancing is a little misleading. Its easy to view refinancing as simply adjusting your current mortgage. Actually, when you refinance youre getting a whole new mortgage. Thats why youll get slammed with a whole new set of closing costs to pay.
Warning: FHA doesnt allow refinancers to roll their closing costs into the new mortgage, so youll need to pay those costs up front. There is one exception to this rule, though. If you decide to spring for a home appraisal, FHA will allow you to finance your closing costs as part of your loan, provided your new loan exceeds your original loan amount by at least 1.5%.
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Who Qualifies For An Fha Refinance
FHA refinance loans can be open to those with poor credit, including people with a FICO credit score as low as 500, depending on the type of transaction. The biggest restriction for FHA loans is the maximum loan amount, which is calculated based upon median home prices, says Heck.
If youre looking to refinance, youll probably come across the FHA streamline refinance and rate-and-term refinancing, and will want to understand them before deciding whats right for you. FHA streamline is a form of a limited cash-out, which is the same as a rate-and-term refinance, Heck explains.
If youre eligible for these mortgage products, you may qualify for reduced income and credit documentation requirements, as well as reduced or waived appraisal requirements.
You also may be able to reduce the monthly MIP you pay, Heck says. This all leads to a quicker and easier streamlined process, which should reduce closing costs and headache that is typically associated with the mortgage qualification process. Its also important to note that for an FHA streamline refinance, the original loan must also have been an FHA loan.
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