Guest blogger Stephanie Barney shares how to get Zero Cost FHA Streamline Refinance
FHA streamline refinancing is one of the easiest and fastest ways to refinance your home with today’s rates based on the value of your home when you originally bought the home. This is getting the best of both worlds.
Zero-cost FHA streamline refinancing doesn’t mean that there are no costs; it simply means that the financing costs are rolled into the loan. The alternative to a zero-cost FHA refinancing is paying the costs out of pocket. In rare cases, lenders can offer completely no-cost loans. In these cases, the lenders choose to absorb the refinancing costs out of a desire to secure your business.
What are the steps of getting a zero-cost FHA streamline refinance?
1. Verify that you are eligible for the streamline refinance program. The FHA must already have your loan to be eligible for its streamline refinance program. Those in the HARP program do not qualify, nor do those with VA loans. There are separate VA streamline refinancing loans.
2. If you are getting a home improvement loan along with the refinance, get quotes from different contractors for the work to be done. You are not allowed to do the work yourself under the program. Find out if you would be better off paying for home improvements up front and increasing the value of your home before using the FHA streamline refinance or if the costs are low enough that it can be paid for through the 203(k) streamline refinance loan.
3. Contact a lender to run the net tangible benefit calculations for a streamline refinance. Rolling closing costs into the loan will increase your monthly payment, which may not meet the 5% monthly payment reduction threshold set by the FHA. However, if you are converting an adjustable rate mortgage to a fixed rate loan, you still qualify for a zero-cost streamline refinance loan even if the monthly payment increases.
4. Lenders will check your payment history and loan balance. You must be current on the existing loan and been late on no more than one payment in the past year. They will verify that you’ve owned the property at least six months and have not refinanced the property in the past nine months. Credit checks and property appraisals are not necessary unless someone on the original mortgage is being removed during the refinance. For example, if you are refinancing a home after a death or divorce, they will check the credit and income of the now-single borrower.
5. Negotiate with the lender who gave you the first quote; you may simply need to talk to a manager or a different loan officer to get a lower refinancing fee. If you have suffered serious hardship recently, ask the lender about their ability to waive fees for those in need.
6. If the new monthly payment is close to your current monthly payment, get additional quotes. You may find an FHA approved lender who will charge lower mortgage refinancing fees. You do not have to refinance with the lender who holds your current mortgage. However, if another lender gives you a lower quote, you can approach your current lender with this information while trying to negotiate the lowest possible interest rate and closing costs.
7. If you are going to include the closing costs in the loan, you must have enough equity in the property to cover both the loan and the closing costs. Lenders may ask for a new appraisal if the loan to value ratio is close to 100%. This is especially true if you are simultaneously taking out a 203(k) mortgage for energy efficiency improvements like weatherizing the property.
8. If you are approved, ask if you will owe any house payments during this time. Some lenders will not require a final house payment while the refinancing loan is closed.
About the Author: Stephanie Barney helps existing homeowners refinance their mortgage quickly and simply with an FHA streamline refinance loan.