What is the favorite choice for first time homebuyers when seeking a mortgage loan? That’s easy. It’s the FHA program. The Federal Housing Administration created the standards for the FHA loan back in 1934 and since then has become the first choice for first timers. Why? There are several reasons. One, the FHA loan is readily available with most every mortgage lender offering the program. Two, the down payment requirement is just 3.5 percent of the sales price of the home and the financial assistance guidelines from relatives and non-profit groups are very liberal, especially when compared to conventional loans. But another advantage of the FHA loan comes after the original loan has already closed—the FHA Streamline refinance.
The FHA streamline refinance loan is reserved for those currently with an existing FHA loan who wish to refinance their current FHA mortgage with one that has a lower rate or refinancing out of an adjustable or hybrid loan into the stability of a fixed rate. What’s so special about the streamline? If you have an existing FHA loan, here is why the streamline is right for you.
It’s easy to qualify for. So easy in fact you can forget about providing your pay check stubs, W2 forms or income tax returns. In fact, there is no verification of your employment. This literally means you can be unemployed and still qualify for the FHA streamline. As long as the new mortgage payment is lowered by at least 5.00 percent, the existing FHA loan is eligible for the streamline process. There is no credit check and no minimum credit scores required for the streamline. The only credit issue addressed is the existing mortgage payment. FHA streamline guidelines require there be no more than one payment within the past 12 months more than 30 days past the due date and no such late payment within the past six months and current by the time the loan package is sent to the closing table.
There is no appraisal required which is a big benefit in areas where home loan values have taken a hit and have yet to fully recover. Borrowers can literally be “upside down” with their mortgage-owing more on the mortgage than the home is currently worth- and still refinance out of a higher rate loan into a lower fixed rate or refinance out of an adjustable rate mortgage into a fixed rate loan.
Having the benefit of the streamline refinance option isn’t reason enough alone to take the FHA mortgage to buy and finance a home, there are enough good reasons for that, but the FHA loan program does have the inherent FHA streamline refinance option which is a huge benefit. FHA loans require a small down payment, competitive rates and are available at most any mortgage lender. The FHA streamline component is just another reason to consider the FHA mortgage, regardless if the borrowers are first time homebuyers or not.