What is a FHA Streamline Refinance Mortgage?

As most zero down mortgage programs have been phased out of the market, more people have turned to FHA financing for their home loan needs. According to a 2009 NYTimes.com article citing Inside Mortgage Finance as its source, FHA loans represented only 1.8% of the market back in 2005 and 2006 and have since grown to account for nearly 17.1% of new originations. Simply put, there are now millions of homeowners who now have FHA mortgages who may benefit from an FHA streamline refinance. FHA streamline refinance loans permit qualifying borrowers to refinance with less paperwork than may be required through other financing channels. Streamline mortgage loan may also require no appraisal that may remove an additional $250-500 expense out the transaction. Some lenders and brokers may not collect income verification, verify employment, or charge lender fees. Basically, an FHA streamline loan allows a consumer the ability to quickly, and hopefully easily, refinance their FHA loan with little to no money out of pocket.

Why Consider an FHA Streamline Refinance?

People have all different reasons for refinancing but the majority of home owners consider refinancing to save money on their monthly payments or are hoping to shorten the duration of their repayment period (i.e. switching from a 30 year mortgage down to a 15 year loan). In a low enough rate environment, it may be possible to accomplish both of those goals in one step. In 2010, mortgage rates fell to the lowest rates since Freddie Mac began tracking rates back in the 40's or 50's . 30 year rates dropped down in the 4.000 - 4.500% range and 15 year fixed mortgage rates fell below 4.000% in some scenarios. This market has enabled thousands of home owners to drop years off their loans while potentially saving tens of thousands of dollars in interest. It is important to note that cash-out refinancing is not available with FHA streamline loans.

Taking the Next Steps

Current home owners who have FHA insured loans and whose payments are current and whose loans are in good standing can take advantage of FHA streamline refinancing with little down side. What closing costs that may exist, can often be given back in the form of a credit at closing. The lender or broker simply inflates their rate a bit and earns more money which they then use to credit back to cover any loan related expenses.

About FHA Loans

The Federal Housing Administration (FHA) provides mortgage insurance on home loans offered by FHA approved lenders. This mortgage insurance protects the lenders against potential losses resulting from borrowers defaulting on their mortgages. FHA loans have become increasingly more popular in the past few years as Fannie Mae and Freddie Mac have tightened their program guidelines making FHA loans one of the go-to sources for low money down mortgage financing. FHA loans are also known for having less strict financing guidelines in that credit standards and debt to income ratios may be slightly more lenient than what is available through other conforming mortgage loans products.