Many people have heard about the FHA Streamline Refinance Program and wondered what it is and how they can benefit from it. For the most part this is actually a program that is aimed more at the banks than the homeowners. You can certainly benefit from the program but it would be through your bank that you would get the benefit, from your perspective it would simply be a refinance like any other.
A lot of people are confused by just what the FHA Streamline Refinance Program is and how it works. In reality it is simply a program that was instituted to reduce the amount of paperwork that has to be done in order to refinance a FHA mortgage. This is the only benefit that is offered and the rest of the program works basically the same as any other refinancing, really the main benefit is for the banks that have offered the loans rather than to the borrower. Nevertheless it is a good idea to understand what the program covers and why it exists.
The reason that the FHA introduced the streamlined program was that during the eighties a lot of people were finding themselves in a position where they had bought houses that they really couldn't afford, not unlike what is happening today. The result was a lot of foreclosures, again not unlike today. The government decided that they needed to do something to help reduce the number of people who were losing their homes so they introduced a program to make it easier for people to refinance. Actually the program was designed to speed up the process and reduce the cost of refinancing for the banks.
One of the main principles of the FHA program is that it is supposed to be used to help people to reduce their monthly payments. Therefore in order to be eligible the refinancing must result in a lower monthly payment. It can result in the mortgage being spread over a longer time so that the total amount that has to be paid is higher but the monthly payments have to be lower. The other important rule when it comes to this program is that no cash can be taken out of the house.
The reason that you can't take cash out of your house using the FHA program should be pretty obvious. The goal is to reduce the risk that you are going to lose your home, obviously allowing people to increase the amount that they owe would not help in this regard. The only other rules that apply to the streamlined program is that the original mortgage must be FHA backed and your payments must be current. Really from the homeowners perspective there is no difference between this and any other refinancing other than that the bank might be more willing to offer it because it is easier and cheaper from their perspective.
