5 Reasons Why New Jersey FHA Streamline is the Best Darn Mortgage Refinance Program

Let’s begin with the easy part.  What is the FHA Streamline Refinance?

It is a refinance program that allows a New Jersey borrower who currently has an FHA mortgage to quickly refinance with much fewer requirements than the usual refinance.   The new loan will also be FHA.

The program is NOT designed for cash back purposes.  It only allows the borrower to get a lower interest rate and payment.  No exceptions on this.  This is the FHA rule.  Borrowers can receive a small amount of cash back just to make the numbers add up – maximum allowed cash back is $500.00.

And why is it the Best Darn Refinance available?

Because there is very little qualifying. 

• No appraisal
• No income verification
• Minimal credit qualifying
• No debt ratio qualifying
• No employment verification (a few lenders will verify)

There are still a few instances where the borrower must qualify:

• The loan cannot be currently delinquent
• The new loan amount cannot exceed the prior loan amount

FHA encourages its borrowers to participate in the program because the lower the interest rate on the loan, the more likely the borrower will be able to afford and pay the monthly payment.  Keep in mind, the loan is insured by HUD.  If the borrower defaults, the Government has to pay the lender for losses suffered on a foreclosure.

This type of refinance is NOT free.  Like every mortgage refinance, there are fees and closing costs involved.  We try to package the loan to be as economical to the borrower as possible, but borrowers should not expect zero closing costs.   Borrowers are often confused about the difference between “no closing costs” and “no out-of-pocket costs.” 

Also, unlike a typical refinance, borrowers should not expect to skip any mortgage payments.   Some might defer a payment.  Some might not.   Every refinance is different.  And all the limitations on the program  are a product of the way FHA/HUD designed it. 

By far, the biggest complaint I have about the Streamline refinance is that many borrowers have never heard of it.  So when approached or presented with this opportunity, they think it is a scam.  This is despite the fact that after the closing of a FHA purchase loan, HUD sends every homeowner  a letter that details the program.  But this is the only notification the homeowner will receive from HUD.  Everything else will probably come from  a lender or broker, and usually by mail.

It would be nice if this program were thrown in the mix and advertised (on a mass scale) along with the many other programs available today.

One last comment:  Any borrower who can benefit from refinancing under this program should not play a game of wait and see.  Because of the way HUD has the streamline set up, the longer the time period between the last loan closing and the new loan closing, the higher the closing costs.  Waiting a mere 6 months longer can make a big difference.  For example:  If a borrower has a current FHA loan amount of $300,000 and decides to keep waiting to refinance, after 6 months of additional waiting, the closing costs will be about $900.00 more.  That’s not small change.

So what if the borrower DOES want cash back or wants to pay off other debt?

Not a problem.  We just do a regular FHA refinance following the normal rules of appraisals, credit scores, employment and income verification, etc.

I have been working with FHA Streamlines since 2001.  Call with questions.

Tagged as: appraisal value, FHA Mortgage, Refinancing

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