What are the tangible benefits of an FHA Streamline Refinance Loan? Believe it or not, that phrase is not just a clever way to say “Streamline refinance loans can help you lower your payments.”
The phrase “tangible benefits” is found in the FHA loan handbook to describe an outcome of getting the loan.
“Tangible benefits” means some distinct help for the FHA Streamline Refinance loan borrower in the form of a lower mortgage rate, a lower monthly payment, the ability to get into a fixed rate mortgage and out of an adjustable rate loan, etc.
In most cases an FHA Streamline refi is meant to give the borrower one or more of these benefits.
In fact, HUD 4000.1 has specific instructions to the lender on this issue;
“The Mortgagee must determine that there is a net tangible benefit to the Borrower meeting the standards in the chart below for all Streamline Refinance transactions.”
In cases where there is not a tangible benefit, or in case where the mortgage payments actually increase due to this transaction, the lender is required to make sure that certain limits are not exceeded.
For example, the house payment that increases more than a certain percentage due to add-ons to the loan such as points, energy efficient upgrades, etc. may have the lender needing to run a credit check for the refinance loan.
A credit check may also be required when lender standards dictate it, above and beyond the FHA minimum guidelines.
What are the tangible benefits to the borrower that an FHA Streamline Refinance Loan can or should give?
- Lower payment or;
- lower interest rates or;
- Getting out of an Adjustable Rate Mortgage into a fixed rate loan.
Reductions in the loan term may be considered a tangible benefit for the borrower if the following criteria from HUD 4000.1 is met:
- the remaining amortization period of the existing Mortgage is reduced;
- the new interest rate does not exceed the current interest rate;
- and the combined principal, interest and MIP payment of the new mortgage does not exceed the combined principal, interest and MIP of the refinanced Mortgage by more than $50.
If you have questions on whether your refinance loan will provide tangible benefits based on your specific needs, speak to your loan officer.