Purchasing a home with your spouse is an exciting time when you can have a place to call your own, decorate as you please, and gain more stability for your family. When taking out a home loan with your spouse, you should know what you’re responsible for and what the laws in your state say […]
Understanding Streamline Refinances
If you are considering refinancing your current home loan to lower your Kansas City mortgage rate, you should explore the option of streamlining. Streamlining was created to speed up the home refinancing process with less paperwork and underwriting required.
Just like any other financing decision, there are pros and cons to streamlining your refinance. Each loan program has different guidelines and rules for handling streamline refinances. Just remember that some loans do not have the option of streamlining. If refinancing will not lower your Kansas City mortgage rate significantly, then it won’t be worth the effort, time, and money spent on the process.
Drawbacks to Streamlining
Government agencies such as the FHA do not allow borrowers to take cash out when using a streamline refinance. Therefore if you need to take cash out for renovations or other projects, the streamline method is not for you. Borrowers are restricted to only altering the rate or terms of their mortgage, and are unable to draw on the equity in their home.
Borrowers are only eligible for a mortgage streamline refinance without credit verification if they have owned their home for at least 6 months. If the borrower has lived in the house for less than a year, the mortgage payment history must be perfect to be considered for a streamline refinance. If you are eligible for streamline refinancing, there are many options available to you.
Advantages of a Streamlined Refinance
Some benefits of streamlining a refinance include:
- No appraisal needed
- Lower closing costs
- Less paperwork
- Faster processing
- Limited income and asset verification
Streamline refinancing has become popular in recent years because of the reuse of the original home’s appraisal. If your property is underwater, this option may be the only one available if you wish to refinance.
No New Appraisals
The purpose of new appraisals is to ensure that your home’s value exceeds the loan amount. With streamlining, no new appraisal is needed. This advantage means that you can refinance even if the home’s value is less than when you bought it. If you plan to pay closing costs out of pocket, then the FHA doesn’t require a second appraisal. With no appraisal needed, you do not have to pay appraisal costs.
Lower Fees & Closing Costs
Unlike normal financing, you pay less fees and closing costs. These lower costs are available because the FHA reduced their rates. Currently, the upfront mortgage premium for eligible homeowners is 0.01%, and the annual premium is 0.55% of the total loan. This only applies if your current mortgage was endorsed by the FHA before June 1, 2009. Homeowners with mortgages after that date will have to pay more.
Faster Processing & Less Paperwork
Streamline refinancing does not require income or credit verification. With less documentation, the process takes less time. Streamlined refinancing can get away with less paperwork because of computerized approval systems. The entire process is much more streamlined, hence the name.
However, just because there is less paperwork to deal with does not mean that that the streamline refinance is right for you. You may find a lower Kansas City mortgage rate with a different lender that will warrant a more lengthy qualification process.