In today’s economy, many homeowners are finding that their financial situations have changed, and this often results in the inability to make high monthly mortgage payments. This is especially true for borrowers who financed a large loan at higher interest rates when the economy was stronger and the housing boom was present. For these borrowers, foreclosure or short sale might seem like the only options. For those hoping to remain in their homes, however, there is another option that can help. Participating in the FHA streamline mortgage program might be just the answer they are looking for.
The biggest advantages to an FHA streamline mortgage are the lack of a requirement for a home appraisal to obtain this mortgage. The borrower is allowed to use the original purchase price in lieu of an appraisal, which can really help individuals who are living in areas where the housing market has seen a downfall. Even if you are upside down in your home, you can often receive approval for this type of mortgage. This is not the case with more traditional refinancing options.
A mortgage often qualifies for the streamlined process if it is currently FHA insured. In addition, no cash can be added to the mortgage when a borrower chooses a streamlined option. The borrower also must be in good standing with their current mortgage, as their credit will not be checked, and instead, late payments will not be viewed favorably since payment history.
Some lenders will offer an FHA streamline mortgage by calling it a “no cost” refinance option. They often do this by charging a slightly higher interest rate which helps the borrower to avoid having to bring closing costs to the table. This is one way to get around the FHA requirement that says borrowers cannot add their closing costs to the current mortgage when the streamlined process is used.
Buyers will typically find that they can reduce their monthly mortgage payment by taking advantage of this process, and this is even the case when their interest rate rises a bit. The advantage to banks in offering this type of mortgage is that it keeps a greater number of individuals out of foreclosure or short sale, thereby reducing the amount of debt that is placed back on the lenders when homes are worth less than they are currently selling for. In addition, it can assist buyers in staying current with their mortgage payments, increasing the income coming back to lenders and reducing the risk that borrowers present.
An FHA streamline mortgage is a great option to explore when homeowners are upside down on their mortgages and struggling to remain current with monthly mortgage payments. Interested homeowners should check with their financial institution to see if they qualify. Once qualified, the process is easy, and the savings can make a real difference in a family’s peace of mind.