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FHA Streamline Refinance Essentials - Things Every Borrower Needs to Know

Few Florida mortgage borrowers know this, but the Federal Housing Administration - or FHA - has allowed streamline refinances on FHA mortgages since the early 1980s. The word "streamline" refers to the fact that this particular form of home loan refinance involves a significantly smaller amount of red tape and paperwork than most typical refinances.

The basic requirements of the FHA streamline refinance are: The mortgage which is to be refinanced should be FHA insured.

- The mortgage which is to be refinanced should be recent and not illegal.

- The refinance is to conclude with lessening the borrower's interest payments and monthly principal.

- No money can be drawn on refinanced mortgages through the streamline refinance method.

Benefits of the FHA Streamline Refinance

- Evaluation is not usually required

- Paperwork involved is minimal

- No income verification, credit check, underwriting fee or employee verification

- Easily decrease or increase the period of the term of the existing loan

- Enjoy benefits of existing low interest rates

- Very little, or even zero, other expenses involved

Most people select the FHA Streamline Refinance because the refinance is available with zero out-of-pocket expenses. This offer comes in two ways. In the first, the expenses, if any, can be covered by the lender in return for a bit higher interest rate. Alternatively, the expenses may be added to the new loan, provided the property has enough equity to cover the additional amount.

Out-of-Pocket Mortgage Costs Covered by Increasing the Interest Rate

Lenders handle FHA Streamline Refinancing in different ways. Few lenders give "no cost" refinances i.e. zero out-of-pocket costs to borrower. They will, instead, usually cover your closing costs by increasing you interest rate slightly.. With this premium, your Florida mortgage lender will typically cover any closing costs required as part of the transaction.

Out-of-Pocket Mortgage Costs Covered by Increasing the FHA Mortgage Amount

Lenders may allow borrowers to pass on paying out-of-pocket expenses by folding the closing expenses in to the next mortgage value. This is done only if there is enough equity in your property, as found by the FHA assessment.

Remember, FHA Streamline Refinances may be done by having no appraisal at all, but then the new loan value must be the same as the original loan value. Note: Investment properties (i.e. properties where the borrower does not live in her or his principal residence full-time) can be refinanced via the straight FHA Streamline Refinance process only. In these cases, out-of-pocket expenses must be paid by the borrower.

About the Author

Kevin Sandridge is a Florida Home Loans Specialist who provides clients with customized, well-reasoned, home loan finance solutions. If you found this article useful, you may find more of his thoughts and insights on his Florida Mortgage Blogger blog.

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