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30-Yr fixed 4.750 % 0.7 to 1
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5/1 ARM 3.125 % 0.7 to 1
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FHA Streamline Refinance

FHA Mortgage Rates & Streamlining

Since the 1980s current mortgage interest rates on Federal Housing Administration approved loans have been made more advantageous by an FHA program designed to assist qualified home buyers. The FHA streamline refinance program allows refinancing of fixed or adjustable rate mortgages at savings of 5% or more monthly.

Thereby saving homeowners money or shortening the term of a loan, or both.

The FHA insures only those loans originated by mortgage lenders approved by the agency. But streamlining can mean “no cost” refinancing with no upfront costs to borrowers — though lenders may list higher current mortgage interest rates to compensate, or may include waived closing costs within the new loan. A full appraisal of purchased or refinanced properties may be required in such cases.

FHA mortgage rates and the rules governing them under the Streamlining process require that the original loan be FHA insured. Plus, borrowers are required to have completed six monthly payments under the prior FHA loan; for loans less than twelve months old, each payment has to have been made on time in the month due. For original loans more than twelve months old borrowers are forgiven a single delinquent payment — so long as it did not occur in the three months prior to application for streamlining.

Additionally, to benefit from current mortgage interest rates in the FHA streamlining program borrowers cannot receive more than $500 from loan proceeds. Assets needed for closing must be verified, and 97.75% is the maximum loan to asset value ratio. A 620 credit score minimum is necessary and equity in the property is required.

Secondary residences and investment properties both qualify for FHA streamline refinancing. For borrowers wishing to refinance from a fixed rate mortgage to an ARM, the FHA will allow them to switch to a one-year ARM if the interest rate is at least two percentage points below the original loan. For borrowers seeking to refinance from an adjustable rate mortgage to one with a fixed rate, the new interest rate cannot be more than two percentage points above that of the original loan.

In reducing the loan term, the FHA forbids any cash-out: so the refinance must be a rate and term refinance. Investment properties and secondary homes are restricted to total mortgage payment reductions and cannot be streamlined into ARMs.

Due to the troubled economy the Federal Housing Administration is tightening up guidelines. But the FHA streamline refinance remains a superior alternative to most conventional refinances. Because the FHA insures loans originated by approved mortgage lenders the risks for lenders are reduced — and borrowers thereby benefit.

Keywords: FHA mortgage rates; current mortgage interest rates