Thanks to Brexit, mortgage rates have been holding near historic lows this month, which has sent many homeowners swarming to refinance into a lower rate. But according to a report from Black Knight Financial Services, more than seven million homeowners in the U.S. still have the opportunity to refinance.
In the first quarter of 2015, only 31,000 homeowners with FHA loans took advantage of the FHA Streamline Refinance Program. In the first quarter of 2016, that number skyrocketed to over 63,000 homeowners. So if you have an FHA loan and haven’t refinanced into a lower rate, what are you missing out on?
What is an FHA Streamline?
The FHA Streamline is a mortgage product reserved for homeowners with existing FHA loans. This refinancing option is considered streamlined because it allows homeowners to reduce their interest rate on their current home loan quickly with the ability to bypass certain financing documents.
FHA Streamline refinancers benefit from the streamlined refinance process, because they:
- Will NOT need a home appraisal
- Will NOT need qualifying debt ratios
- Will NOT need income verification
- Are eligible for the new FHA private mortgage insurance ratereduction (if their loan term is 15 years or greater)
Who is Eligible for an FHA Streamline Refinance?
Although the FHA Streamline Refinance does allow homeowners to bypass traditional mortgage verifications of income, debt and home value, the program does enforce some minimum standards for applicants. You may be eligible for an FHA Streamline Refinance if:
- Your home is currently financed with an FHA mortgage
- The mortgage to be refinanced is current (not delinquent)
- The refinance will result in a lower monthly principal and interest payment or, under certain circumstances, will convert an adjustable rate mortgage (ARM) to a fixed-rate mortgage
What Does It Cost to Refinance with an FHA Streamline?
FHA does not allow lenders to include closing costs in the new mortgage amount of a streamline refinance. Some lenders offer a "no cost" option by charging a higher rate of interest on the new loan, allowing the borrower to avoid upfront closing costs.
For more options and information on refinancing your current home loan, download our free Refinancing Guide.