Archive for rate and term refinance

Paul ProffittBorrowers ask me all the time…What is the difference between a FHA Streamline and a Rate and Term Refinance?  These FHA loans are very similar but they do have there differences.  First of all, streamline refinance loans are only available for homeowners who already have an existing FHA mortgage.  If you have a FHA loan then you may qualify for a streamline refi, but you payment history needs to be perfect.  FHA will not reward you with a streamline if you have been more than 30-days late on your existing FHA loan payment. 

 

 

The 2nd major difference between a FHA Streamline Refinance and a rate and term refinance is that streamline refinancing ususally does not require an appraisal.  Rate and term refinance mortgages will always be required to provide a new appraisal.  In a declining market the appraisal can really define the loan.  Since the FHA streamline waives the appraisal, the loan will typically close faster than a standard FHA rate refinance loan.

Of course there are some similarities between these two FHA loans.  There is no cash out allowed in either FHA loan and both refinance products allow lending to 97.5% Loan to Value.  Both FHA loans also require 1.5% mortgage insurance paid at closing and both allow the borrower to finance the insurance cost so they do not have to pay the closing costs “out of pocket.”

Paul Proffitt is a contributing finance writer for Nationwide and a Senior Loan Manager for CFB Loan Services.  His published loan articles can be found online at sites like CNN and Nationwide Mortgage Loans.

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