What Is An FHA Streamline Refinance?
The FHA Streamline Refinance is a reduced-paperwork, verification-free, appraisal-less refinance program meant to lower a homeowner's monthly mortgage payment by 5 percent or more monthly. FHA Streamline Refinance is a special refinance program available only to homeowners with FHA-insured mortgages. Homeowners must be current on their mortgage to use the FHA Streamline Refinance, and must have made at least 6 payments on their FHA-insured loan in order to be eligible.
The FHA Streamline Refinance is available in all 50 states and allows for loan sizes of up to $729,750 in certain high-cost areas including Loudoun County, Virginia; San Jose, California; and Montgomery County, Maryland. In high-cost areas in which multi-unit homes are common, maximum FHA loan sizes are even larger. In Brooklyn, New York, for example, a 3-unit home can be financed up to $1,129,250; financing for a 4-unit home is available up to $1,403,400.
The date you set your FHA Streamline Refinance closing matters. So, when should you close your FHA Streamline Refinance? The best time to close your FHA Streamline Refinance is absolutely at the end of the month.
Time Your FHA Streamline Refinance Closing
FHA Streamline Refinance can be one of the simplest, fastest refinance programs available. According to FHA guidelines, there is no appraisal to commission; no income to verify; and no credit to review (however, some lenders may ask for tax returns as a risk precaution).
Although there is limited paperwork, and the nature of the product is easy-breezy, you do need to keep in mind that, in order to close on a FHA Streamline Refinance it requires attention to details. Specifically, refinancing homeowners should pay special attention to their expected mortgage closing date.
You could be paying up to 30 days of prepaid mortgage interest which may be double-paid without your knowledge. This is because of an FHA rule which gives mortgage lenders permission to collect a full month of mortgage interest, regardless of whether the loan's been paid off prior to the month's end. This differs from a conventional refinance for which a mortgage lender will only collect through the payoff date.
For example, assume you are a homeowner in Columbus, Ohio who is using the FHA Streamline Refinance to refinance a $250,000 mortgage; and assume your new FHA loan will fund on the 15th of the month.
· 15 days of per diem interest paid to new lender, to cover the rest of the month
· 30 days of per diem interest paid to old lender, because the FHA prescribes it
Funding an FHA Streamline Refinance on the 15th day of the month, would have you paying 45 days of mortgage interest for a 30-day month (a waste of 15 days of extra interest). Or, in this case, $360. If you fund the loan on 30th of the month, only 1 day of mortgage interest is paid to the new lender. This would save $335.
Below are optimal 2013 FHA Streamline Refinance closing dates. You can use this as a guide to minimize your "double interest". These dates assumes that your home is your primary residence such that the 3-day right of rescission applies. If you're closings for FHA non-owner occupied properties, rental homes, and other properties not subject to the 3-day right of rescission should be scheduled for the last business day of the month.
· May 2013 : A Friday, May 24 closing will fund May 30, 2013
· June 2013 : A Monday, June 24 closing will fund June 28, 2013
· July 2013 : A Friday, July 26 closing will fund July 31, 2013
· August 2013 : A Monday, August 25 closing will fund August 29, 2013
· September 2013 : A Wednesday, September 25 closing will fund September 30, 2013
· October 2013 : A Friday, October 25 closing will fund October 30, 2013
· November 2013 : A Monday, November 25 closing will fund November 29, 2013
· December 2013 : A Thursday, December 26 closing will fund December 31, 2015
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