With all the attention that's been focused on the Making Home Affordable program, it's easy to forget there are other options out there for reducing your mortgage payments. And if you have an FHA or VA mortgage, there's one that's simply fantastic - a streamline refinance.
On a streamline refinance, there's no need for proof of income, no need for an appraisal, no need for a check on your assets. The main requirements are that you already have an FHA (Federal Housing Administration) or VA (Veteran's Administration) mortgage and have been current on your mortgage for the past 12 months.
"If you have an FHA loan or a VA loan, the best way for you to lower your interest rate would be a streamlined package," said Bob Walters, chief economist with Quicken Loans. He added, "Even if you don't have a job, as long as you can meet the basic qualifications, you're fine. Even if you're underwater, you're ok."
"Underwater" homeowners can still refinance their mortgage
The "underwater" feature is particularly useful in the current real estate market, when falling property values have left many homeowners owing more on their mortgage than the property is worth. It's been one of the key challenges in qualifying homeowners for refinances under the Making Home Affordable program, where officials have considered raising the current loan limit of 105 percent of the current market value.
On a VA/FHA refinance, falling property values aren't an issue - as long as you've been current on your mortgage payments for the past year, you should be able to qualify, no matter how much home values have declined in your area.
Loan modification an option for those behind on payments
That said, it's essential for VA/FHA homeowners in financial difficulty to get a streamline refinance before they start missing mortgage payments - otherwise, they'll have lost their ability to qualify. If you have fallen behind, you can still qualify for a mortgage loan modification through the Making Home Affordable program, but the process will be considerably more difficult.
A streamline refinance allows you to replace a current, high-interest mortgage with a new one at today's low rates with a minimum of paperwork. In some cases, a credit check may be required, but Walters noted that most homeowners who've been current on their payments the past year should be able to pass. Like any loan, there are closing costs, but those can either be rolled into the loan, usually in exchange for a higher interest rate, or paid separately up front.
A few differences in VA, FHA streamlines
The VA streamline is called an Interest Rate Reduction Refinancing Loan, or IRRRL. Both it and the FHA streamline are generally similar, but with a few small differences. Neither allows you to take money out of the transaction, but the VA streamline allows you to take out as much as $6,000 to make energy efficiency improvements to your home.
The FHA has a similar option called a 203(k) loan that allows you to take from $5,000 to $35,000 out of your home equity for home improvements, which must be performed by a contractor. Both of those situations do require a new appraisal however, unlike a streamline that does not increase the mortgage balance owed. Other restrictions may apply as well.
In both cases, you begin the process by contacting your lender to inquire about obtaining an FHA or VA streamline refinance. However, you are not required to refinance through your existing lender - in fact, the VA urges veterans to shop around different lenders to find the best refinancing deal. Lenders must be FHA or VA approved to participate in the program.
For more information, contact your VA/FHA lender or visit the Department of Housing and Urban Development web site http://www.hud.gov/offices/hsg/sfh/buying/streamli.cfm for information on FHA streamlines, or the Department of Veterans Affairs web site http://www.homeloans.va.gov/IRRRL.htm for information on IRRRLs.