If you currently have an FHA home loan, you have the opportunity to refinance with limited documentation, including no income verification, with an FHA streamline refinance program.
Stated income refinancing appeared to be history, but FHA will streamline your refinance in order to reduce the documentation and underwriting normally required. No documnetation loans have all but disapperaed, but FHA will reduce or limit the refinance documentation. That means no tax returns, W-2 forms, or pay stubs, and no bank statements to verify assets. A verification of mortgage is required to determine if your loan payments are current, which is a requirement.
Another potential benefit of the FHA streamline refinancing program is that a home appraisal may not be needed. Along with no verification of income or assets, conventional verification of home value may not be necessary.
There are specific rules and limitations that determine if your refinance will fit into the FHA streamline guidelines, including the following:
1. The current mortgage to be refinanced must already be FHA loan
2. The subject property must be the borrower’s primary residence
3. The current mortgage to be refinanced should not be delinquent
4. The streamline refinance only allows a maximum of $500 cash out
5. The refinance must result in reducing principal and interest payments
For an FHA streamline refinance without a new appraisal, the maximum loan amount is determined by using the lesser of the following two calculations:
1. The original principal balance of the existing FHA mortgage, plus the new up front mortgage insurance premium, which is currently 1.5% on a streamline refinance.
2. The existing FHA mortgage, plus closing costs, prepaid taxes, insurance, interest, and the new up front mortgage insurance premium. Subtract refund of old premium.
When using a new appraisal for an FHA streamline refinance, the maximum loan amount will be determined by the lesser of the following two calculations:
1. The appraised value multiplied by the maximum loan to value percentage, which usually ranges from 97% to 97.75% depending on the state and the loan amount.
2. The existing FHA mortgage, plus the closing costs, prepaid property taxes, hazard insurance, up to 30 days interest, and subtract any refund of insurance premium.
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