AZ FHA Streamline on Rental Property

FHA Streamline for Rental Property

FHA homeowners know that an FHA streamline refi is the quickest, easiest and cheapest way to refinance their existing FHA mortgage if the goal is to lower their interest rate.  What many don’t know is that FHA investors/rental property owners can also use an FHA streamline to cut their interest rate on an FHA rental home as well.  Yes, rental properties that have an FHA loan attached to them may go through the same no appraisal/no income verification required simplified streamline program that FHA owner occupants can!

Process is the Same – Rules are Different

FHA/HUD have limited what costs may be rolled into a new FHA streamline loan amount over the past few years.  They have take these restrictions to the next level with regard to investment property FHA streamlines.   While an owner occupant “streamliner” may include their existing loan balance and the additional interest added to their final payoff into their new Phoenix FHA streamlined mortgage, an investor “streamliner” has to play by a different rule.  Investors refinancing their FHA rental property with a streamline may NOT include the additional interest that is added to their final mortgage payoff during a refinance.  Based on the fact that FHA charges a full month’s interest on each FHA mortgage payoff, this investor related streamline rule results in an increased “cash to close” figure for the investor streamlining their FHA mortgage.

Borrowers with FHA loans on rental properties are typically folks that at one time or another occupied the home as their primary residence.  For one reason or another they have moved out of their home and converted it into to a rental.  While HUD and FHA strictly prohibit the use of an FHA mortgage to acquire rental properties they will allow FHA rental property to be streamlined.  Now, if HUD/FHA see that a streamline applicant shows a pattern consistent with abusing FHA financing in order to acquire rental property they will pull the streamline plug and slam the refi door on that individual in an instant.

Reduce Cash to Close on FHA Streamline

Based on the HUD/FHA rules that prohibit rolling closing costs into an FHA streamline loan (and the interest on a payoff for investor streamlines) it is often helpful for FHA streamline borrowers to develop a strategy to reduce their cash to close on their refi.  The easiest way to trim one’s cash exposure is to lock their new loan at an interest rate that is .125% or .25% above the “market.”  Increasing the interest rate just a fraction allows their FHA mortgage lender to give them a credit toward their closing costs reducing the overall funds required to close.

Each streamline scenario is different and every homeowners goals are unique.  It is important that every Arizona FHA streamline applicant speak with an FHA mortgage expert to make sure their streamline is set up the best  possible way!

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