The whole home loan process can be long, stressful and confusing which makes a term like “streamline mortgage” sound like a dream. However, you know it’s got to be too good to be true. Well, the good news is that it actually exists and it isn’t just a fancy terminology that a marketing director came up with. As the name would suggest, a streamline mortgage is fast-track to your financing, but it’s not for everyone.
What is a Streamline Mortgage?
The most important thing to understand about the streamline mortgage is that it’s not an option for a new loan, but rather for refinancing a home loan you already have. Streamline programs are designed to help you quickly and easily take advantage of lower interest rate that may have become available since you took out your original loan.
Many lenders offer “streamlined” alternatives to existing borrowers to lower costs and make refinancing more accessible. Basically, the reason this option exists it that while many people think of refinancing to save money, a refinance also costs money upfront, even though most of the process is all paperwork. That financial hit and the procedural hassle can deter many from going down this road, even if it’s smart for the long term. A streamline mortgage solves this problem by taking a few shortcuts.
For a streamline mortgage, generally, you don’t have to use the same lender as you did for your original loan. That said, your original lender might make the process even easier and cheaper, just to keep your business.
Benefits of a Streamline Mortgage
Typically, streamline mortgages come with limited paperwork. Other perks include things like there is no need to verify your income and assets, no need for a new home appraisal, faster processing, and lower closing costs.
FHA’S Streamline Mortgage
if you already have an FHA mortgage, you’re in luck! The Federal Housing Administration has a short and sweet streamline mortgage program that will lower your interest rates and payments quickly and effectively. You just need an FHA- approved lender.
The FHA also has another streamline mortgage product that will help you modify or improve your home. It’s called an FHA Streamline 203k Loan, and it will make anywhere from $5,000 to $35,000 available to repair, upgrade, or weatherproof your home.
Requirements for a Streamline Mortgage
Unfortunately, you can’t just walk up to a lender the moment interest rates drop and demand a streamline refinance. While all lenders have their own list of stipulations, they usually include these requirements:
- You have lived in your house for a certain amount of time (often at least 6 months)
- You are current on your mortgage
- You can’t tap your home’s equity and take out any additional cash on your place
- Your payments will have to be reduced at least enough to cover the cost of the refinance and then some
