While guidelines and rules vary by lender, here’s a basic list of features:
- Your current mortgage must be current on all payments
- You must be receiving a clear benefit from the refinance
- You may not take cash-out on the loan
- Often there are minimal credit requirements and less paperwork meaning the process is faster and less expensive
Current mortgage – up to date and current is the number one requirement, meaning this path is not one for anyone who’s behind or in any danger of foreclosure. Clear benefit means your rate has to drop enough to cover all related fees, or convert from an adjustable to a fixed-rate loan.
What type of mortgages can be streamlined?
FHA – makes it easy to refinance your current FHA mortgage in good standing to a lower rate. FHA has permitted streamline refinances on insured mortgages since the early 1980s. What makes this process streamlined? There is no appraisal, so you can be underwater in your home by a little or a lot, and still be able to refinance your home. Keep in mind that you have to be either lowering your monthly payment or converting from an ARM to fixed rate loan, and you cannot take any cash out on the loan when you do an FHA streamline-refinance. Record low mortgage rates make this option very attractive to borrowers.
VA – also has streamline refinance option for current VA borrowers called the Interest Rate Reduction Refinancing Loan or IRRRL. With the VA’s options, as with the FHA loan, you must be paying less each month or going from an adjustable to fixed rate loan, and again, don’t expect cash back. The VA streamline refinance doesn’t require an appraisal or much credit work and with this loan, you can refinance at no cost as the option to roll the costs of the new loan into the new mortgage. Since VA borrowers have already taken care of their Certificate of Eligibility, the process is much easier and faster than an initial VA mortgage loan.
HARP – is a new mortgage program for homeowners who owe more on their home than the home is worth (also known as underwater). HARP (Home Affordable Refinance Program) and HARP 2.0 offer refinance options for Fannie Mae and Freddie Mac loans older than June 1, 2009, with the loan to value ratio of 80% or more. You must be current on payments of your existing loan. This loan carries limited fees and closing costs. It is possible to have a loan servicer (the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan) to be different than the owner of your mortgage. To see if your loan is owned by Fannie Mae or Freddie Mac, visit their websites – Fannie Mae Freddie Mac
Easy = Best?
While a streamline refinance may be the easiest option, it may not be the best option for you and you should shop different options other than your current lender or loan type to find the best rate/cost of the loan especially if you’re not underwater, not in a credit situation, and working at the same job for 2 or more years. Savings on a lower rate may offset the additional time and paperwork required for a more conventional approach to refinancing your home. Call The Mortgage Guys to discuss your options for refinancing your Atlanta home!