FHA Streamline Refinance ConsMax McCoy
The FHA Streamline Refinance Cons are there. Given, it’s essential to do proper research before assuming the FHA streamline is right for you.
FHA Streamline Refinance
The FHA streamline refinance program offers borrowers with an existing FHA mortgage a new FHA-insured home loan without requiring an appraisal or any documentation of income or assets.
The refinance program is relatively hassle free, requiring no income verification and little to no credit check. It is easy to qualify for and the process is quick—this is why people love it.
However, don’t let the flashy offers blind you before doing the necessary homework. There are a few FHA streamline refinance cons that you should keep in mind when weighing your refinance options.
FHA Streamline Refinance Cons
FHA Mortgage Insurance Premium (MIP)
If you’ve got a newer FHA loan, you can expect your upfront and annual premiums to be higher. This means your payments could also go up. You must pay upfront mortgage insurance when taking out an FHA loan. Also, if your loan-to-value is higher than 78%, you must pay annual mortgage insurance premiums.
While most lenders include closing costs into your loan balance for a conventional loan refinance, the FHA streamline doesn’t. The FHA refinance program does not allow borrowers to finance their closing costs into their loan balance.
You’ll have to make sure you’ve got enough cash on hand to cover closing costs before beginning the process.
Some lenders may offer a no-closing cost loan. This, however, could actually end up costing you more in the long run and should be considered carefully.
Borrowers Must Be Current on Mortgage
To qualify for the FHA streamline refinance program, borrowers must be current on their mortgage. This means that you cannot have any missed/late mortgage payments within the three months prior to applying.
Because of the FHA streamline benefits such as no income verification and credit check, this point is often overlooked.
Unfortunately, borrowers looking to refinance their mortgage while in difficult financial circumstances may not be eligible for the FHA streamline program.
Though the FHA streamline program is designed to save you money, it still requires careful attention. The FHA streamline refinance cons must be considered when shopping for your best refinance option.
If the benefits still outweigh the drawbacks, and you meet the criteria for an FHA streamline refinance, find your best rate today from the nation’s top lenders!