You can refinance in a matter of a couple of weeks if you play your cards right. If you have a government-backed loan, they each offer streamline programs. These programs require minimal documentation and no appraisal. If you provide everything the lender needs right away, you can usually get your loan closed in a week or two.
FHA Streamline Offers a Quick Refinance
If you currently have an FHA Streamline loan, you may be eligible for the FHA Streamline. You may qualify if you made your last 12 months of mortgage payments on time. The FHA allows a maximum of one 30-day late payment in the last 12 months for this program. If you meet these requirements, you must meet the following:
- Live in the property as your primary residence
- Have a benefit for the refinance (lower payment, more stable program)
- Prove you have the money to pay for closing costs unless you roll them into the loan
Underwriters don’t verify your income, credit score, or home value. They base your eligibility off your mortgage payment history. That’s not to say every lender abides by this rule. Some may ask for proof of income or look at your credit score. If you need a quick refinance, shop around for lenders that strictly use the FHA’s requirements.
The process for the FHA Streamline is simple. You’ll complete a loan application as you would for any other loan. On the application, you disclose your income, assets, and liabilities. You provide your HUD-1 from your 1st mortgage closing with the application. The lender processes the application and verifies your mortgage payment history. They order a title search on your home. This ensures there are no liens on your property. The underwriter verifies you benefit from the refinance. Usually this means a lower payment due to a lower interest rate. If you refinance from an ARM to a fixed rate, though, it counts as a benefit.
The final step is closing on your FHA Streamline. You attend a closing just like your original FHA loan. The lender pays off your original mortgage and you sign documents for a new mortgage. With the right steps, you can complete it in a matter of a couple of weeks.
One closing cost you should be aware of is the upfront mortgage insurance fee. You paid this fee with your original FHA loan. You’ll pay it again with the refinance. The percentage is the same. However, you may get a refund. You must refinance within 3 years of your loan’s origination date, though. After making 6 months of payments, you are eligible for a refund starting at 78%. The amount decreases proportionately each month until you reach the 36th month. After that point, you don’t receive a refund.
If you are eligible for a refund, the closing agent deducts the refund directly from the new upfront mortgage insurance you owe. This helps decrease the cash you need for closing.
VA IRRRL Closes Quickly
The VA offers a similar program. It’s called the VA Interest Rate Reduction Refinance Loan and it can close in a matter of a couple of weeks as well. As the name suggests, you need a lower rate to qualify for the program. It’s the VA’s way of helping make your loan more affordable. Just like the FHA loan, you must have a timely payment history. A maximum of 1 late payment is allowed in the last year.
The remaining documents and procedures work the same as the FHA loan. The largest difference is the upfront funding fee. Unlike the FHA loan, you’ll pay a smaller fee this time around. Right now, it equals 0.5% of the loan amount. You can pay it at the closing or wrap it into your loan amount along with your allowed closing costs.
USDA Streamline can Close Quick Too
The USDA rolled out a streamline program that served as a pilot program in a few states. Today, it’s available throughout the country. It works much the same way as the above two streamline refinance programs and closes just as fast. The USDA requires:
- Timely payment history over the last 12 months
- Proof you’ll occupy the property as your own
Lenders don’t need much else to process the USDA streamline loan. You can usually close the loan within a couple of weeks as long as you meet the requirements. Luckily, even if your home is no longer in a designated rural area, you can still use the program. As long as you have a USDA loan on the property now, you are eligible.
One difference with the USDA loan, though, is your eligibility income. Lenders don’t verify your income to measure your debt ratio. However, they do need to make sure you are still eligible for the program. This differs from qualifying. Eligibility means your total household income doesn’t exceed the USDA’s maximum limits. Check out the USDA income guidelines before applying for a refinance. If your total household income exceeds the threshold, you won’t be eligible for the program.
If you qualify, you’ll pay an upfront mortgage insurance fee of 1% of the loan amount. You’ll also pay annual mortgage insurance on the new loan amount.
Other Refinancing Options not as Quick
If you don’t qualify for a streamline program with your specific government-backed loan, you have other options. A conventional refinance is always available no matter the type of loan you have. The difference is the time it takes and the required documents. You won’t have the benefit of a streamline process. You’ll need to provide full documentation including:
- Income documents
- Asset statements
- Credit score
The lender will fully verify you for the loan. If you had time to improve your credit score and gain some equity in your home, this may be a viable option. If you owe less than 80% of the home’s value, you can also avoid paying PMI. The conventional loan may take a little longer, though. Because you need an appraisal and the underwriter must fully evaluate your file, it can take a little longer.
A quick refinance is possible when you use the right program. Start with your loan program’s streamline options. See if you qualify and how you benefit. You can compare that option to a conventional refinance. Just keep in mind the conventional loan will take longer. Either way, the more prepared you are with the required documents, the better your chances of closing quickly!