What is an FHA Streamline Refi?

An FHA Streamline Refinance is a type of refinanced home mortgage loan that features considerably less documentation than an original FHA mortgage loan. Because there is less documentation for the borrower to provide and the lender to process through underwriting the loan is "streamlined".

Eligibility

Eligibility for an FHA Streamline Refinance is fairly simple:

• The current loan on your home has to be backed by FHA
• You must be current on the payments
• You can only refinance your current principal with certain exceptions to include closing costs
• Your monthly principal and interest payment has to be lower after the refinance
• You may choose a different FHA approved lender for your refinance

If you are not sure whether or not you have any FHA backed mortgage, the easiest thing to do is to ask your lender. Another option is to locate your original mortgage documents because that will tell you if you have an FHA loan.

If you are not current on your payments, but will be able to catch up shortly you should contact your lender to find out what their additional specific requirements are for the FHA Streamline Refinance and if you qualify. If you don't this is a perfect opportunity to discuss other ways you can modify your loan to reduce your monthly payments.

Taking Out Equity

Unfortunately, you can't use an FHA Streamline Refinance to access any equity in your home. The purpose of these loans is strictly to reduce your monthly principal and interest payments by allowing you to convert your existing principal to a lower interest rate loan. If you need to use the equity in your home for something like tuition, medical expenses or purchasing a new car then you will want to talk your lender about qualifying for a different loan product.

Investment Property

If you have an FHA loan on your investment property (a home that you own that is not your principal residence) you can get a Streamlined Refinance. The caveat here is that you have to be able to pay your closing costs up front; the refinanced loan amount must be equal to your current mortgage balance.

Streamlined Does Not Mean Free

FHA Streamline Refinances are subject to closing costs, which are lender and loan specific. Depending on the amount of your loan, you should expect to pay several thousand dollars and up for closing.

• "No Out of Pocket Closing Costs" is offered by most lenders. This allows the borrower to add the cost of the closing to the principal amount, effectively mortgaging the cost of closing costs
• Some lenders may have a no closing cost program, but be sure to understand the terms because this is always in exchange for a higher mortgage interest rate

• You will save the most money in the long run if you can afford to pay your closing costs out of pocket at the time of closing

Get Legal Help

If you were investigating this type of refinance because you are struggling to make your mortgage payments, talk to an attorney today. An experienced bankruptcy or real estate attorney can help explain your available options and usually can intervene on your behalf with creditors, such as your mortgage lender. If you are like most Americans, your home is probably your single largest lifetime investment. Talk to an attorney if you have any questions about the best way to continue to afford to keep it.