If you are looking for a FHA mortgage and have been having trouble making your payments and or have a bad credit score you may think that you do not have any options other than foreclosure or short sale. You also may have poor credit and are upside down on your mortgage, so you are out of luck, right?
Wrong. The Federal Housing Authority or FHA has the FHA Streamline program that could be the perfect fit for you. This handy FHA program makes it easier to refinance your home loan even if you have credit problems and are underwater on your mortgage. Many people have been faced with a similar problem in the aftermath of the mortgage meltdown of 2008, and FHA is trying to make it possible for more of these people to stay in their homes. FHA Streamline Refinances are the simplest way for homeowners with an FHA home mortgage to refinance into a lower interest rate.
Here are some ways that FHA's Streamline Refinance program can help you:
#1 Income and Employment Verification Waived
If you already have an FHA mortgage, you probably are eligible for this program. One of the biggest benefits of the program for a struggling homeowner is that you do not have to document your income or employment status. This can be a huge help because some people with credit problems have lost their jobs. Because the program does not require you to verify this information, it removes a major obstacle to refinancing for most people.
#2 Bank Account and Credit Verification Waived
It gets even better! FHA also waives verifying how much is in your bank account. And, you also do not have to submit your credit score to FHA! Many people in the aftermath of the last recession have ruined credit and they thought that they were stuck paying on a house that is worth far less than when they bought it. Wrong!
#3 No Appraisal Required
Usually, the bank would require an appraisal and the house would have to appraise for a certain amount before the refinance would be approved. This bad credit FHA program does not have any appraisal requirement. FHA will allow you to use the original purchase price of the home as your home's current value, regardless of what its actual value is today. Therefore, FHA does not care if you owe more on the home than it is worth. Even if you owe double what your home is worth, FHA will refinance your home for you. The appraisal waiver policy has been hugely popular with millions of homeowners who were underwater on their mortgages.
#4 Program Can Be Used to Reduce PMI Payments
Some borrowers are able to refinance with the FHA Streamline Refinance program and get rid of their private mortgage insurance payments. That payment can be $100 or $200 per month, so getting rid of PMI can be a major financial benefit.
Why FHA Does All of This
Some people think all of this sounds too good to be true, but it really does make a lot of sense. Remember that the main role of FHA is to insure mortgages. If millions of people default on their mortgage obligations, FHA has to pick up the tab for the lenders who made the mortgages in the first place. Obviously, it is in the best interest of FHA to help people to refinance their old mortgages so that they can stay in their homes and continue to make their payments.
Even though you do not have to meet credit and income requirements to refinance, there are some restrictions. You do have to have a good three month payment history on your mortgage. There cannot be any late payments in the last 90 days. You can have made one late payment in the last 12 months. You also need to have made six mortgage payments since your last refinance, and 210 days must have passed since the most recent closing date. You also must be able to show that there is a tangible benefit in doing the streamline refinance, such as getting a lower rate or a lower payment. Also, FHA will not allow you to increase your loan balance to cover closing costs.
For FHA mortgage holders who have been in financial problems since the last recession, the FHA Streamline Refinance program can truly be a Godsend. If you do not have to have an appraisal, or have your income or work history verified, there really are not any reasons that you should not refinance. Refinancing can help you to stay in your home and to make lower payments at a lower interest rate, so you should talk to an FHA-approved lender today to see what they can do for you.
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