Refinance options are depleting, and lenders are more concerned with how well your mortgage performs. Qualifying for a mortgage refinance these days are a lot harder than it has been in the past because of limited options. Some lenders offer a streamlined alternative to borrowers to help lower their costs and to make refinancing more accessible for them. Some banks offer their own streamline refinance programs. These particular programs have much less credit requirements and are easier for borrowers to qualify for. They also offer more lenient income and asset verification. A streamline refinance takes off a lot of time of the qualifying process and could increase your chances of an approval. Like most mortgage programs a streamline refinance comes with a list of requirements, but in the end the point of a streamline refinance is to help the homeowner, not put more money in the lender’s pocket. Your mortgage rate should drop significantly as well as your loan should be converted from an adjustable rate to a fixed rate mortgage.
Streamline Refinance Guidelines
Some of the possible streamline refinance guidelines:
• Must be up to date and current on your existing mortgage
• Refinance must clearly show it is to benefit the borrower
• There’s no cash out allowed
• Limited income/asset verification for qualification
• Low credit requirements
• Less paperwork and less time
• Faster processing
• Lower closing costs
• No appraisal needed
*Note: These guidelines can vary from bank to bank and not every lender will offer a streamline refinance.
FHA Streamline Refinance
The FHA is one of the most popular and widely known streamline refinance options out there. The FHA has been permitting streamline refinances since the 80’s. The FHA makes refinancing your mortgage easy and helps lower your current mortgage rate. Many borrowers have been able to qualify for a streamline refinance effortlessly because of the minimal credit scoring requirement and limited documentation requirements. Even with inadequate income, employment or assets borrowers can still qualify for an FHA streamline refinance. While these are just a few examples of the requirements necessary for an approval you must also show your existing mortgage is in good standing and that the refinance will lower your monthly mortgage payment. If you get a no-cost refinance you may not pay any out of pocket expenses but you could be stuck with a higher interest rate. This happens because the FHA won’t allow lenders to roll closing costs into the new mortgage without an appraisal. Since an appraisal isn’t required the FHA streamline refinance is a good option for those who are upside down on their mortgages.
DID YOU KNOW: President Obama lowered the mortgage insurance premium on FHA streamline refinances to help more people take advantage of the lower mortgage rates.
VA Streamline Refinance
The FHA isn’t the only one offering streamline refinances. The VA also offers a streamlined VA loan refinance, this is most commonly known as an Interest Rate Reduction Refinancing Loan or for short, an IRRRL. The VA streamline refinance is easy to apply for and can save you money while also lowering your mortgage rates. The same basic rules for the FHA apply to the IRRRL. The VA also doesn’t require an appraisal or any credit underwriting package. Your COE or certificate of eligibility from the VA is also not required. Just some of the many benefits that make this option a quick process and a favorite.
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.