The new buzz word in mortgage is a Streamline.  As a borrower you have probably seen the ads and have been solicited for a “No Cost Streamline!”.  Before you run off and start applying, take time to find out what a Streamline Refinance is and who qualifies to take advantage of a Streamline?

First off FHA Streamlines have been around for years.  To start your current mortgage must be a FHA insured mortgage.  The intent is to lower the monthly principal and interest payments (P&I).  The Streamline must decrease P&I by the lesser of $50 or 10%.

A streamline is considered a Rate and Term refinance, thus paying off debt or taking cash out is not an option ($500 max cash back).

Credit guidelines are what make the FHA Streamline unique. The credit profile is based on mortgage only.  Although many lenders require a minimum 600 mid score.  The benefit of the mortgage only is the fact that liabilities are not calculated into a debt to income (DTI) ratio. Underwriting is only concerned with the performance of the FHA loan.  A delinquent mortgage is generally not eligible for streamline refinancing until the loan is brought current.

One of the Standout benefits of a Streamline is that Subordinate financing (2nd mortgage) may remain in place, regardless of the total loans against the property, with or without appraisals.  What this means is that for homeowners in declining markets and who are upside down on their mortgage, they can still qualify for today’s historic Mortgage Rates.

There are Two (2) types of FHA Streamlines.

• Streamline Refinance with an Appraisal
  Maximum Loan to Value (LTV) can increase up to 97% of appraised value.*
• Streamline Refinance without an Appraisal
  New loan amount not to exceed the original Loan Amount. I prepare my borrowers and advise that a they may need to bring in approximately one payment at closing due to final calculations.*

*The two options command their own post and will receive further explanation.  Feel free to contact me for further information, as this is primer to help understand the basic facets of a FHA Streamline.

Image: http://www.flickr.com/photos/wwworks/2963461192/in/photostream/

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