By Gustan Cho
Various Kinds Of Refinance Mortgage Programs
There are various types of refinance mortgage loan programs. Those with higher mortgage rates may want to just do a rate and term refinance mortgage loan. Homeowners with equity but many bills with high interest may want to do a cash-out refinance mortgage loan and consolidate all of their bills. Cash-out refinance mortgage loans are great for homeowners who are drowning in debt with many credit cards with very high interest rates. Mortgage lenders will charge a slightly higher interest rate for cash-out refinance mortgage loans. Other homeowners may want to shorten their term or some with 15 year fixed rate mortgage loans may want to extend it to a 30 year fixed rate mortgage loan. Others who have a 30 year fixed rate mortgage may want to refinance to a 15 year fixed rate refinance mortgage loan at a much lower interest rate. Others who have a FHA loan may want to refinance their FHA loan to a conventional loan to avoid the hefty monthly FHA mortgage insurance premium.
Refinance Mortgage Process
The refinance mortgage application process is the same as the home purchase mortgage application process. Refinance mortgage loan applicants need to complete a four page official 1003 mortgage application, qualify for credit on the particular mortgage loan program they are applying for, submit documents like two years tax returns, two years W-2s, recent paycheck stubs, 60 days bank statements, and other documents that is needed to underwrite the mortgage loan application. However, there are refinance mortgage loan programs where not all documents are needed which we will cover in the following paragraphs.
FHA Streamline Refinance Mortgage
For homeowners who currently have an existing FHA mortgage loan, they can qualify for a FHA streamline refinance mortgage loan which will waive new appraisal and no credit scores nor income verification is needed. The only requirement is that the homeowner be timely on their current FHA mortgage payments for the past 12 months and that the mortgage loan borrower be employed full time. FHA requires that a FHA streamline refinance mortgage loan applicant be employed but there is no income verification and no paycheck stubs need to be provided. You can be late on any monthly credit obligations but you cannot be late on your current mortgage payments for the prior 12 months. If you currently have a FHA loan with an interest rate of 5.0% or higher, consider doing a refinance with a FHA streamline refinance mortgage.
FHA streamline refinance mortgages are only for rate and term refinances. You cannot do a cash-out refinance with a FHA streamline refinance mortgage loan.
VA Streamline Refinance Mortgage
Similar to the FHA streamline refinance mortgage program, homeowners with a current VA mortgage loan can take advantage of the VA streamline refinance program. The VA streamline refinance program is also known as IRRRL which stands for VA Interest Rate Reduction Refinancing Loan. Similar to FHA Streamline refinance, the IRRRL does not require appraisal and no income verification is required. The refinance mortgage applicant’s credit scores does not matter. As long as the refinance mortgage loan borrower has been timely on their VA mortgage loan payment the past 12 months, the borrower’s credit scores do not matter. They can have recent late payments and collections and still qualify for the VA Interest Rate Reduction Refinancing Loan as long as they have been timely on their mortgage loan payment for the past 12 months. As with the FHA streamline refinance mortgage loan, VA Interest Rate Reduction Refinancing Loan are for rate and term only and does not apply for VA cash-out refinance mortgage loans.
Home Affordable Refinance Program ( HARP )
The Home Affordable Refinance Program, also referred to as HARP, is Fannie Mae’s and Freddie Mac’s equivalent to VA Streamline Refinance mortgage and FHA Streamline Refinance mortgage but for conventional loans. The Home Affordable Refinance Program is not an indefinite mortgage refinance program and the program is only good until December 15, 2015. HARP was created by the government to assist homeowners who have underwater conventional mortgages due to the 2008 real estate collapse. To qualify for the Home Affordable Refinance Program, homeowners need to have conventional mortgage loans that are owned and backed by either Fannie Mae and/or Freddie Mac prior to June of 2009. No appraisal is required for HARP loans and the mortgage loan balance can be higher than the actual value of the property. No late payments are allowed for the past 12 months in order to qualify for a HARP loan.
USDA Streamline Refinance Mortgage Program
Those homeowners who currently have a USDA mortgage loan can refinance their USDA loan with the USDA streamline refinance mortgage loan. USDA Streamline refinance loans, like VA Streamline refinance loans and FHA Streamline refinance loans, do not require income verification nor credit checks. No appraisal is required and bad credit is okay as long as the USDA homeowner has been timely on their current USDA mortgage loan for the past 12 months. Only rate and term USDA refinance loans are permitted and cash-out refinance is not allowed.