FHA has permitted streamline refinances on
insured mortgages since the early 1980's. The streamline refers only to the
amount of documentation and underwriting that needs to be performed by the
mortgage company, and does not mean that there are no costs involved in the
transaction.
The basic requirements of a streamline
refinance are:
-
The mortgage to be refinanced must
already be FHA insured.
-
The mortgage to be refinanced should be
current (not delinquent).
-
The refinance is to result in a lowering
of the borrower's monthly principal and interest payments.
-
No cash may be taken out on mortgages
refinanced using the streamline refinance process.
Companies may offer streamline refinances in
several ways. Some companies offer "no cost" refinances (actually, no
out-of-pocket expenses to the borrower) by charging a higher rate of interest on
the new loan than if the borrower financed or paid the closing costs in cash.
From this premium, the company pays any closing costs that are incurred on the
transaction.
Companies may offer streamline refinances
and include the closing costs into the new mortgage amount. This can only be
done if there is sufficient equity in the property, as determined by an
appraisal. Streamline refinances can also be done without appraisals, but the
new loan amount cannot exceed what is currently owed, i.e., closing costs may
not be added to the new mortgage with those costs either paid in cash or through
the premium rate as described above. Investment properties (properties in which
the borrower does not reside in as his or her principal residence) may only be
refinanced without an appraisal and, thus, closing costs may not be included in
the new mortgage amount.
Content supplied by mortgage101.com
|
