For FHA loan customers, the FHA streamline refinance process allows you to quickly lower your monthly payment. You can potentially save thousands of dollars over the course of your loan.
Since 2020, mortgage rates have dipped, becoming a great time to lock in a new low rate. Currently, nationwide trends show rates hovering around 2.6%. That’s the perfect opportunity to take advantage of the streamlined refinance process.
Even when rates are rising, it’s still a great idea to refinance if you’re eligible.
But once you start that process, what’s it going to cost you upfront?
Let’s break down closing costs and estimate how much it’ll cost for FHA streamline customers.
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The FHA Streamlined Process
The streamline refinance for FHA customers is a similar program to other refinance loans. Though it’s only for those with current FHA loans.
The goal of the streamline refinance is to lower your interest rate and the monthly payment for your mortgage. And with minimal paperwork.
30-year mortgage holders can make their loans more affordable but, unfortunately, can’t change the terms of their loan. A 15-year mortgage holder, however, can change to a 30-year loan. This often lowers the monthly payment by itself.
The refinance will also not cancel mortgage insurance, that will still be required. But the annual rates could go down.
When you meet with a lender, you won’t need any of the traditional loan documentation. The FHA does not require verification of income, employment, or even credit to refinance.
This is a great program should you ever find yourself underemployed or start to have financial trouble. According to the refinance guidelines, you’d still qualify, as long as you’ve been making your current payments on time.
If the lender you find is asking for employment verification or has a credit requirement, there are other lenders out there who do follow the FHA’s minimal guidelines.
The FHA does have some requirements you’ll need to meet:
- You must show at least three months of on-time mortgage payments
- It must be at least 210 days since your home purchase or last refinance
- Show the lender that you benefit monetarily from a refinance
A monetary benefit just means that you can show that this refinance will lower your current rate by at least 0.5%.
Simply, there’s no reason to be paying more on your mortgage loan than you could be.
There’s also some paperwork involved.
The lender could ask you for the following:
- Loan application
- Current mortgage statement payment history
- Two months’ worth of bank statements
- Utility bills showing you use the home as a primary residence
They may also ask for the contact information for your employer, only to verify employment, not necessarily income. This requirement will also vary by lender.
Closing Cost Estimate for FHA Streamline Refinance
All of these benefits of refinancing sound great, right?
Before you get too excited, let’s estimate how much it will cost you to refinance.
As we mentioned above, the FHA does require mortgage insurance, both annually and an upfront amount. Luckily, the upfront mortgage insurance payment can be added to your loan.
Closing costs, however, must be paid out-of-pocket and can’t be rolled into the loan. The FHA streamline refinance requires closing costs just like any other loan.
Closing costs are comprised of fees from various people involved with your loan. They include fees for things like loan origination, underwriting, processing, and title insurance.
The good news is that an FHA refinance does not require an appraisal, which is often paid for in the closing costs. Those appraisals typically add about $500-$1000 to the closing costs.
The estimated closing costs for an FHA streamline refinance vary from 2-5% of the loan amount. If your loan amount is $150,000, your estimated closing costs could be between $3,000 and $7,500.
Lenders can waive closing costs
It’s recommended to shop for lenders for your refinance. One lender may give a lower estimated closing cost than another.
Because the lender wants your business, they’re willing to negotiate a lower or waived amount for closing costs.
Lenders get a service release premium for each loan that they close. Basically, this is money that the lender collects from a loan aggregator once the loan is closed.
That premium allows them to potentially waive thousands of dollars, which could include your closing costs. So you could potentially have those costs paid completely by the lender.
You can’t eliminate closing costs completely but you can find the right lender, who may be open to negotiating. In this scenario, you can get your closing costs paid for.
Find Your Perfect Refinance Lender
Refinancing your mortgage under the right circumstances can potentially save you a lot of money by lowering your rate and monthly payment.
Even with estimated closing costs in the thousands, you’ll end up saving that much, and more, over the course of your loan with a lower payment and rate.
Get prepared to refinance your mortgage with our knowledge base of loan options and mortgage resources.
My Perfect Mortgage will match you with the right lender for your refinance. Get started with us today!
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.