3 Streamline Refinance Programs With the Government’s Backing

Refinance is a viable opportunity to make one’s mortgage more affordable, allowing you to refinance your existing nonqualified mortgage, for instance, to lower its rate and lower its payment. A streamline refinance just ups this standard option minus tons of paperwork plus flexible guidelines.

Streamline refinance programs are available to homeowners who have government-backed mortgages and want to refinance but remain in their respective government loans and want to make their loans more manageable.

The Big 3 Streamline Refinance

Federal agencies such as FHA, VA and USDA insure, guarantee or back home loans for low to moderate income households, veterans and active service members, and families residing in rural areas.

Each of their streamline refinance programs is meant to refinance existing mortgages that are current with no late payments. Learn about each program and its perks.

VA Streamline Refinance for Veterans

Program: More popularly known as the Interest Rate Reduction Refinance Loan, this streamline refinance stands by its name of allowing existing VA borrowers to reduce their current mortgage rate (except when the transaction involves refinancing an adjustable-rate mortgage to a fixed-rate mortgage).

What the program requires is for the borrower to achieve savings as a result of the refinance: it can be through a shorter loan term or lower rate. And that the borrower should be able to recoup the costs of refinance within 36 months, with closing costs to be rolled into the loan.

Perks: no appraisal, no credit check, no debt-income ratio analysis, no income verification. Lenders will pull borrowers’ credit reports but will not use them to underwrite loans. But because of lender overlays, expect lenders to ask for credit scores and debt-to-income ratios.

USDA Streamline + Streamlined-Assist Refinance

Program: The USDA actually has two streamline refinance programs for its current homeowners. First is the older streamline refinance which is for guaranteed loan borrowers. Then there’s streamlined-assist refinance for direct and guaranteed homebuyers that became a permanent option after initially starting out as a pilot program in select states.

Both streamlined refinance programs want to see a reduction in the borrower’s monthly payment or at least $50 net reduction in the new monthly payment’s principal and plus interest and annual fee. When refinancing, the new rate must not exceed the current rate, and the loan term must be within 30 years.

Perks: no appraisal (except for direct borrowers with subsidy); no credit review but a credit report must be available; no minimum income requirement for as long as it does not exceed the household income limit; no out-of-pocket fees; no home inspections.

FHA Streamline Refinance for Underwater Mortgages

Program: FHA Streamline Refinance is just like any streamline refinance because of its reduced documentation but it’s an important choice for homeowners whose little to lack of equity in their homes could have pushed them to the sidelines.

The FHA is also clear about net tangible benefit depending on the kind of transaction, the rate, the term of the loan and the type of loan being refinanced. Otherwise, it prohibits any cash out of the transaction.

Perks: no appraisal, no income analysis, no credit analysis, no equity requirements. Limited income and credit might be required in certain instances.

Wait, There’s HARP®

While not exactly a program for government mortgages, HARP® or Home Affordable Refinance Program® follows a process similar to that of streamlined refinancing and is backed by the government.

No underwater limits, no appraisals or underwriting, less paperwork are some of its features. HARP® is available through 31 December 2018 for Fannie Mae or Freddie Mac owned mortgages.