FHA can reduce the loan documentation that is normally
required to qualify by using an FHA streamline refinance,
which means there are no tax returns, W-2 forms, or pay stubs
needed, and no bank statements needed to verify
assets or cash reserves.
A credit report may not an be FHA
requirement either but, the lender may require one to
determine the the rate. The lender will also require
verification to show your FHA
loan is not delinquent.
If you currently have an FHA home loan, you have certain
benefits under the FHA streamline refinance program which are
not available to other conventional loan borrowers.
Here are 5 guidelines to fit into the FHA streamline
refinance program:
1. The mortgage to be refinanced must be an FHA home loan
2. The property being refinanced must be your primary
residence
3. The current mortgage being refinanced cannot be delinquent
4. The streamline refinance allows a maximum of $500 cash out
5. Refinancing must result in reduced principal and interest
payments
Another benefit of the FHA streamline refinance program is
that you may not even need a new appraisal, which can remove a
potential problem in a housing market with declining values.
An FHA streamline refinance without a new appraisal has a
maximum loan amount determined by using the lesser of the
following two calculations:
1. The original principal balance of the existing FHA home
loan, plus the new up front mortgage insurance premium, which
is currently 1.5% on a streamline refinance.
2. The existing FHA home loan, plus closing costs, prepaid
taxes, insurance, interest, and the new up front mortgage
insurance premium. Subtract refund of the original insurance premium.
An FHA streamline refinance with a new appraisal has a
maximum loan amount determined by the lesser of the following
two calculations:
1. The current appraised value multiplied by the maximum
loan to value percentage, which usually ranges from 97% to
97.75% depending on the state and the amount of the loan.
2. The existing FHA home loan, plus the closing costs,
prepaid property taxes, hazard insurance, up to 30 days of
interest, and subtract the refund of the original mortgage
insurance premium.
If you have a second mortgage on your home, the lien holder
must agree to subordinate their loan regardless of the total
loan to value. FHA will allow the combined amounts of the
first and second mortgages to exceed the normal loan to value
and the maximum mortgage limit for the area.
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