What Is Stream Line Financing?

What is streamline financing? In the ever-changing mortgage lending industry, loan programs and qualification guidelines change frequently. With new programs or specialty loan options growing to fit changing needs and economic conditions, the words and phrases often become confusing and even overwhelming. Streamline financing is an option available to homeowners seeking to refinance an existing mortgage loan without the in-depth verification process of a traditional refinance.

How is the loan process “streamlined”? It’s called "streamline" because the documents, verification and underwriting of the loan is not as in depth—the process is more direct and less complex than traditional refinancing applications. Typically, a streamline refinance applicant must have made mortgage payments on time for the previous twelve months. Unlike a traditional refinance, depending on the lender’s guidelines, your income may or may not be verified by the lender. If the initial purchase or mortgage loan was recently closed, a new appraisal may or may not be necessary. The process is intended to allow a borrower the ability to more quickly and easily refinance an existing loan—provided the borrower fits the lender’s basic qualification guidelines and does not present a default risk.

Who is eligible for streamline financing? Current homeowners or borrowers with either conventional or FHA mortgage loans may be considered for streamline financing if the current mortgage is in good standing and the goals of the borrower can be met with a streamline refinance.

What does streamline financing offer a borrower? The purpose of streamline financing is to lower the interest rate and/or lower the payment of your current mortgage. Streamline financing is offered on both conventional and FHA loans. The program is a rate and term refinance option, meaning that the streamline refinance does not offer any cash out in most situations. As the financing program only seeks to refinance the home—without adding extra money to the refinance—these refinances would not work for someone seeking debt consolidation hoping to receive monies for home improvement or repairs.

When is it possible to apply for a streamline refinance? Lenders often use different guidelines when determining when or if a borrower’s application is eligible for streamline refinancing. Sometimes, a streamline refinance may be offered immediately, while often the program requires a year of successful mortgage payment history.

Why would you consider a streamline refinance? If you have an adjustable rate mortgage, you may wish to apply for streamline financing to get a loan with fixed rates. Some seek to lower interest rates while some seek to lengthen the commitment of the loan for lower payments. With the exception of receiving cash out, or consolidating higher debt loans, streamline financing serves similar goals as traditional financing while limiting the paperwork, and sometimes the costs, involved in accomplishing your financial goals.

Resources:

U.S. Department of Housing and Urban Development