Loan Modification

The Real FHA Short Refi: The FHA Streamline Refinance with No Appraisal

By Gina Pogol

With all the talk recently about the FHA short refi, (not) coming to a bank near you, the short refi that can actually be done has gotten short shrift. It’s a little gem called an FHA streamline refinance with no appraisal.

Your  mortgage has to be an FHA loan, and you have to be employed and current on your payments. That’s the hard part. But if you have that taken care of, the rest is easy.

You won’t need to get and pay for a home appraisal, because the property value isn’t an issue. FHA is already backing a loan against that same property, so the agency is intelligent enough to realize that a new appraisal changes nothing.

You get to skip the credit report. FHA doesn’t require one, but some lenders do. If it’s an issue, ask about this when shopping for an FHA refinance lender.

Is all this not doing anything wearing you out?

There are some limitations. You cannot do a streamline refi on property that is not your primary residence. You cannot take more than $500 cash out. Your mortgage payment must decrease by at least 5% if you go from a fixed loan to a fixed loan. You can’t wrap the costs of the refinance into the mortgage (doing so will trigger the need for an appraisal).

The term of your new mortgage must be no more than 30 years or the remaining term of the mortgage plus 12 years.  So you can’t use a streamline refinance to get a 30 year loan if you currently have a 15 year loan, but you can go from a 30 year loan to a 15 year mortgage, a fixed loan to an ARM, or an ARM to a fixed. Each of these transactions has different requirements.

So, if you have an FHA mortgage, be happy. FHA is about the only government mortgage program behaving sensibly these days.

Full post as published by FHA Mortgage Guide on August 09, 2010 (boomark / email).