The Federal Housing Administration (FHA) Streamline Refinance is a refinancing program for people who have a FHA loan. It is one of the easy ways to refinance an FHA loan where a borrower can refinance without having to verify their income and assets.
You have an opportunity to refinance with an FHA streamline refinance if you have an FHA-insured mortgage of your house. Also, if you have an FHA loan and can qualify for an FHA streamline refinance, it can be a great deal.
Before taking a FHA Streamline refinance, borrowers should consider all its pros and cons and decide what is better for them.
Pros of FHA Streamline Refinance
- No appraisal required
The FHA streamline refinance allows you to use the original purchase price for your home’s current value. This doesn’t only save you from cost and hassle of getting an appraisal; it allows eligibility even if your loan value is higher than your home’s market value.
- No job, income verification required.
The FHA streamline insurance program does not require any verification of their employment, income, assets or credit score to qualify for the insurance program. Being unemployed or underemployed will not prevent you from refinancing through an FHA Streamline. Also, it doesn’t require any submission of pay stubs, tax documents, bank statements, employment verification or even a credit report to qualify for a FHA streamline refinance.
- Fast and easy Process
The process of the FHA Streamline refinance loan requires very less documentation. So, if you are postponing refinancing expecting that there may be a very long procedure, , the FHA Streamline is an appealing solution.
[ Further Reading ] Pros and Cons of Refinancing a Home
Cons of FHA Streamline Insurance
- Mortgage Insurance
Mortgage insurance should be paid more than once when you take out a new FHA loan. And if the loan value is higher than 78%, then the annual mortgage insurance should be paid annually. This mortgage insurance automatically increases the loan balance and monthly payments.
- Closing Costs
The FHA borrowers will not be able to finance closing costs into the loan balance, but they will be forced to use cash to cover it. The closing cost varies according to the location and the average cost is approximately around 3% of the loan.Though many lenders offer a “no-closing cost loan” but this means that you are paying a slightly higher interest rate over the life of your loan, thus should be considered carefully.