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Mortgage 101: FHA Streamline Refinance

What sets an FHA Streamline Refinance apart from a conventional refinance is that verification of your income, employment and credit score is not required. Also, a home appraisal is not necessary with an FHA Streamline Refinance. If you’re eligible, the FHA will allow you to use your home’s original purchase price—or your most recent home appraisal—as your home’s current value for the refinance.

The two biggest eligibility requirements are as follows: 1) You must have a perfect payment history on your current mortgage for at least the last 12 consecutive months, and 2) The refinance must have a “net tangible benefit.” The FHA defines this as a “5.0 percent reduction to the principal and interest of the mortgage payment plus the annual mortgage insurance premium” or “refinancing from an adjustable-rate mortgage into a fixed-rate loan.”

This type of refinance can be a particularly good choice if you’re “underwater” on your mortgage (you owe more on your mortgage than your home is worth). Since the FHA allows a homeowner to use either their home’s original purchase price or a past home appraisal as the current value for an FHA Streamline Refinance, you may benefit if you purchased your home at price that’s higher than its current value or if you have a favorable past appraisal.

As with any type of loan, you’ll need to carefully consider the costs associated with an FHA Streamline Refinance, namely the interest rate, closing costs and the mortgage insurance premiums. Keep in mind that since this is an FHA-insured loan, you will need to make an upfront mortgage insurance payment at closing as well as a payment each month. Also, if you’re looking to “cash out” (get cash back) on your refinance, such a loan may not be your best option as the FHA stipulates that no cash may be taken out on an FHA Streamline Refinance.

For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988.

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