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FHA Streamline Refinance and When to Avail

The FHA streamline refinance is a program offered to homeowners who have houses financed by the FHA. Earlier this year, the Obama administration announced a reduction in fees whenever a borrower opts for FHA streamline refinance.

The FHA mortgage granted to borrowers has competitive rates compared to those which can be availed from private sources. Sadly, homeowners who have their houses financed by the FHA are also affected by the global economic crisis and the skyrocketing mortgage rates.

Refinance and Get a Better Deal

Unlike most private mortgage companies which offer higher mortgage rates and refinancing costs, the FHA streamline refinance is a way much better deal. There is a need for a borrower to avail of this special product of the FHA if he is having financial difficulty. Often, borrowers have other reasons for getting refinanced program and this may include the following:

Better Mortgage Rates

It can be seen the US government has been making great headways when it comes to reducing the burden of homeowners with mortgages. Mortgage rates are now at an all-time low of 4%. If a borrower has difficulty making ends meet, then lower mortgage rates under FHA streamline refinance may be the answer to his problem.

Reduction in monthly mortgage payments

A reduction in mortgage rates will automatically result in lower monthly mortgage payments. Monthly mortgage payments are computed by multiplying principal due for the month by the interest rate. With affordable mortgage rates, the borrower’s monthly burden can be relieved. Also, some refinance programs allow the extension of the loan term. With a longer payment terms, the monthly mortgage payments will be greatly reduced.

To free up cash tied to the mortgage payments

Some homeowners may have other plans for their families. Some of them may need to purchase a new car or send their children to College. In order to fulfill these plans, cash must be set aside. By refinancing an FHA mortgage, the difference between the previous and the lowered monthly payments can be used for other beneficial purpose.

When is it best to Avail of an FHA Streamline Refinance?

Some borrowers who avail of an FHA streamline refinance only think about the reduced monthly mortgage payments. Often, a borrower fails to think if the refinance arrangement is necessary or practical. A careful evaluation of ones financial standing is the first step to finding out when is it best to avail of an FHA streamline refinance.

If a borrower has problems with his mortgage and other obligations, then there is a need to get a refinance program from the FHA. With the refinance program, the duration of the loan can be extended from 15-30 years. Also, this program gives the borrower savings in monthly loan payments by offering lower mortgage rates. But before going through with the refinancing arrangement, a borrower should consider the insurance premiums and annual fees associated with the program. If these costs would exceed the savings from the lowered mortgage payments, then the terms of the refinance program need to be modified.

It is also best for a borrower to avail of an FHA refinance if he passes the agency’s standards. Even if this program is very lenient, it still requires a borrower to pass some standards. A borrower is eligible if:

  • He has a perfect mortgage payment for the past twelve months,
  • The refinance has a valid reason

If a borrower notice that the mortgage rates of his existing loan with the FHA is higher than those being offered today, then this is the best time to get a refinancing arrangement. Lower mortgage rates mean lower monthly payment and more cash for other household expenses. Even if a borrower is currently not having financial problems, an FHA refinance can give him savings because of lower mortgage rates. The proceeds of the new FHA loan can then be used for investment, for home improvement, and other family disbursements.

Timing is very important when deciding when to avail of an FHA streamline refinance program. Checking the trends in mortgage rates seems to be the best indication that going through a refinance is good choice. If the mortgage rates are climbing, then it is a bad idea to go through with the refinancing scheme. Always remember that refinancing is all about reducing the burden of the borrower so the effect of mortgage rates, refinance fees, and duration of the refinanced mortgage loan should be considered.

About the Author: Georges Kfoury is the founder and Chief Executive Officer of Leaderscorp Financial Inc. headquartered in Rancho Cucamonga, CA, a leading provider of mortgage financing dedicated towards providing affordable home loans. He founded the company way back 2003 from a ground level, without having the mortgage background. In spite of this, he was able to immediately take the company a level of generating annual income ranging from 8 to 10 million dollars.