The FHA’s Streamlined Refinancing Loan Program was created in the 1980s. The objective of this type of refinancing mortgage is to save borrowers time and money, plus cut down on all of the usual stacks of required paperwork. There are two types of refinancing mortgages within the program. One FHA streamlined mortgage product is for borrowers who are already holding an FHA mortgage. The other type is a VA streamlined refinancing loan that is available to active military, reservists, and veterans who’ve already taken out a VA loan. Since they are refinancing loans, the new mortgage will have a lower interest rate that the previous one. Streamlined loans are also referred to as Interest Rate Reduction Refinancing Loan, or IRRRLs.
For those Texas homeowners who have a conventional home loan and wish to refinance with an FHA loan, that is also a possibility. Borrowers wanting to switch from their conventional loan program and refinance with an FHA loan will have to go through the typical application process again, including employment verification, credit check and meeting debt-to-income ratio requirements.
Here is a look at the main requirements for an FHA Streamlined Refinancing Mortgage:
- The borrower must use a lender who has been pre-approved by the FHA.
- The borrower must have owned the property for a minimum of 6 months before seeking a refinancing loan.
- The borrower must be 100 percent current on all of his or her home loan payments.
- An appraisal is not required, however, the refinancing total can not exceed the original loan amount.
- The borrower should be prepared to pay the closing costs for the refinancing program up front. There is also the possibility of a “no-cost” streamlined refinance, where the closing costs are included in the overall price of the mortgage. This is often accomplished by slightly raising the interest rate. Doing so serves to covers the usual closing cost fees for a refinancing mortgage.
The FHA Streamline 203(k) Loan program is another refinancing mortgage product especially for homeowners looking to obtain funds for home improvement costs. Ranging from the minimum amount of $5,000 to the maximum limit of $35,000, the FHA’s 203(k) refinancing loans cover home improvement and repairs, such as improving energy efficiency, weatherizing and lead paint removal. The main consideration is that the home may not be significantly altered, such as building an addition or extra story. A professional licensed contractor is also required to do the work. If the borrower is a licensed contractor, then this requirement is waived. Furthermore, any contractor committing to the job must sign a contract detailing the costs and estimated time frame. Of course, all of the work must be handled under the guidelines of the local construction ordinances with proper permits and required inspections.
Whether you’re already an FHA mortgage holder, thinking about switching in order to take advantage of an FHA streamlined mortgage or interested in the 203(k) option, make sure to evaluate your financial goals with a trustworthy Texas mortgage lender. That way, you can determine if a streamlined refinancing loan is right for you.