FHA Streamline Refinance: lower your monthly payment in 5 easy steps
Here is a 5 processing steps for an FHA Streamline refinance:
Determine if you qualify for an FHA streamline refinance. To take advantage of this program, homeowners must already have a mortgage loan that is insured by the FHA. Homeowners must be current on their loan payments, and they must be refinancing to lower their monthly principal and interest payments.
Evaluate your debt-to-income ratio. You’ll need a debt-to-income ratio of a maximum of 41 to 43 percent, depending on the lender. The ratio will depend on the size of your new mortgage payment, but you can get a rough idea of that payment with a mortgage calculator. You may need to pay off some debt to qualify for an FHA refinance.
Call several mortgage lenders or compare refinance quotes online and explain that you are interested in refinancing your mortgage loan using the FHA streamline process. Make sure, though, to ask the lenders with which you talk if they are on the Department of Housing and Urban Development's list of approved lenders. These are the only lenders that can take on a streamline refinance. Compare the rates and fees that these lenders quote you, and select the lender with which you are the most comfortable. You do not have to work with the lender that is currently servicing your mortgage loan.
Decide whether you want to pay your refinance closing costs, these vary from lender to lender, usually cost 3-6% of the total amount of your new loan, upfront or roll them into your monthly payments. If you choose the latter option, your lender is required by the FHA to have your home appraised. An appraiser will calculate the current market value of your home to determine that you have enough equity in it to qualify for a refinance.
Check your credit. Before you start shopping for a new FHA loan, check your credit report and your credit score. FHA lenders typically require a credit score of 620 or 640 or above, but some have higher standards. If you need to fix an error or take steps to boost your score, it could take a few months or longer, so it’s best to start this process as early as possible.
Fill out and sign your lender's Uniform Residential Loan Application, also know as a 1003 form. This form will require you to fill in basic financial information about yourself, such as your annual income, length of employment at your current job and monthly debt obligations.
Sign the closing documents provided by your lender to make your FHA streamline refinance official. You will also have to pay any closing costs at this time, unless you've opted to roll these costs into your monthly mortgage payments.