Streamline Refinance: Which Option Are You Eligible For?

Refinancing your mortgage can go a long way in helping you to save. It basically involves taking a new mortgage to replace your existing one. The new loan usually comes with a lower interest rate, meaning your monthly mortgage payments also reduce after a refinance.

Alternatively, the monthly payments can remain the same or increase slightly, but with the benefit of a shorter mortgage term. That means you get to pay off your mortgage earlier and focus on other equally important projects. For example, you can convert a 30-year to a 15-year with just a tad increase in your monthly payments.

Whichever option you choose, the refinance will help you save. Sounds great, right? It actually is, and it’s even better if the process is streamlined. In that case, it will be known as a streamline refinance or streamline refi.

What Is Streamline Refinance?

Streamline refinance is simply refinancing that eliminates the paperwork, legwork, and many steps that are common with mortgage applications. The lender omits specific requirements like appraisal, income check, and asset verification to make the process quicker and more affordable to the homeowner.

It doesn’t mean that they don’t do a background check before approving. They only choose to use the information you provided when you were applying for the original home loan. Other than being convenient regarding time and expenses, the streamlined process increases your chance of getting approved regardless of the type of mortgage loan you currently have.

Speaking of the kinds of mortgages, which home loans have a streamline refi option?

Your Streamline Refinance Options

Nowadays lenders offer streamline refinance for virtually all types of mortgages, including jumbo loans. Jumbo streamline refinance is hard to come by when the outstanding loan amount is still beyond the conforming limit. But you can still get it if you work with a good mortgage company. We here at Mortgage Right help our clients get the best streamline refinance deals for all mortgages, including jumbos.

Here are the main streamline refinance options:

  • FHA streamline refinance

The FHA streamline refinance is perhaps the most popular of all refinance options. It is meant for homeowners who currently have FHA-insured mortgages. To be eligible, you have to meet the following requirements:

  • You must have had the mortgage for at least 210 days.
  • You must be current on your mortgage payments.
  • You should not have more than one late payment in the past 12 months.
  • The FHA mortgage interest rate must have dropped significantly such that your monthly mortgage payments will reduce after the refinance.
  •  You should not get cash in the process.

If you need cash after a refinance then perhaps the FHA cash-out refinance might be suitable, but not the streamline option.

If you meet the requirements, you will enjoy a streamlined process that does away with an appraisal, income/employment verification, asset check, and down payment. Although the FHA doesn’t require a credit check, it is possible for a lender to request for it. But it shouldn’t bar you from getting a refinance unless it is extremely undesirable.

  • VA streamline refinance

The Veterans Affairs (VA) offers arguably the most affordable mortgages. If you are a veteran or service member with an existing VA loan, you can make it even more affordable by doing a VA streamline refinance. It is also known as the VA Interest Rate Reduction Refinance Loan (IRRRL).

The refinance requires:

  • You to be VA eligible. Meaning, you should have served at least 90 days during wartime or 181 days during peacetime. If you are a National Guard or Reserve, then you should have spent at least 6 years in service. Spouses of service members are also eligible if the spouse died in the line of duty or due to a service-related disability/illness.
  • The refinance should lower your monthly payments, or you will be switching from an ARM to an FRM.
  • You don’t get cash in the process. However, the VA does have a cash-out refinance for those who need money after refinancing.

When you’re doing a streamline VA refinance you won’t be required to present a certificate of eligibility. Other things that are not usually required include down payment, credit check, appraisal, income verification, and employment history.

Contrary to an FHA streamline refinance where you’re not allowed to roll the cost of the mortgage into the loan, with a VA streamline refinance you can. That is what is known as a no cost VA refinance.

  • USDA streamline refinance

This refinance option is for homeowners with the 30-year fixed USDA home loans. If you bought your home in a suburban or rural area using that mortgage loan then you may be eligible to refinance it.

Here are the things that lenders consider during underwriting:

  • Your loan must be the 30-year fixed USDA mortgage. Other types of loans cannot be refinanced under this option.
  • The property that you used the mortgage to buy should be your primary residence.
    You should be current on your mortgage payments.
  • You should not have missed more than one monthly payment in the past 12 months.
    After the refinance, your monthly payments should reduce by at least $50.
  • You should not get cash out of the refinance. In case you are cash strapped you could consider the USDA cash-out refinance option.

The best part is that you will not be required to verify your income. You can also add a co-borrower to the mortgage during the refinance. For example, if the original mortgage was in your name only, you can refinance it and add your spouse or family as a co-borrower. You should know that a borrower cannot be removed after addition.

  • Conventional streamline refinance

Streamline refinance is not limited to FHA, VA and USDA mortgages only. Homeowners who used conventional mortgages can also enjoy the simplified, streamlined refinance process. That allows for a lower interest rate, switching from ARM to FRM or vice-versa, and adjusting the term of the loan.

So what requirements should you meet to do a streamline refinance your conventional mortgage? Well, there’s no one-fits-all because of how much conventional mortgages are customized, but here are a few things that the lender may ask you:

  • Employment history with at least 2 years under the same employer.
  • Income verification, usually paycheck stubs for the past two months.
  • Asset verification.
  • New home appraisal.
  • Credit score of 660, but some lenders will accept anything from 600.
  • Mortgage insurance if the property has a loan-to-value ratio of 80% or more.

The one thing that makes conventional streamline refinance trump all other types of refinancing is the fact that it covers all kinds of property. You can use it to refinance your primary residence, second home and investment property. That’s not usually the case with FHA, VA and USDA streamline refinance options.

Final Thoughts

If you have been making your monthly mortgage payments faithfully then perhaps you should consider refinancing your home loan for lower rates. That will help you save a lot of money, especially in the long term. It can impact your financial plan in a very positive way.

If you need help figuring whether it is the right time to refinance your mortgage, give us a call and we will help. Our Mortgage Right experts are well experienced to know the best time to refinance each loan. We will help you secure the fastest and simplest streamline refi, regardless of the loan you currently have.