- No credit check/income verification: You can avoid submitting to a credit check or submitting paperwork verifying your income.
- Evidence of payment on time: Your mortgage lender will need a minimum of six consecutive mortgage payments paid in full and on time.
- Net tangible benefits: The refinance has to produce a net tangible benefit if you want to qualify. This can be a 5% reduction in your monthly mortgage payment. It can also mean a switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
- Limited cash out: For mortgages refinanced under this program, you may not be able to withdraw more than $500 cash. Remember: the biggest benefit of an FHA streamline is to permanently lower your monthly mortgage payments.
3. Check out FHA rate-and-term refinance
FHA streamlines are reserved for current borrowers of FHA loans. With an FHA rate-and-term refinance, on the other hand, any borrower can apply.
Similar to FHA streamlines, FHA rate-and-term refinancing is not a cash-out program. Instead, it is designed to help you reduce your housing costs each month. You must put all the proceeds toward paying off your current mortgage, as well as any costs that come with the transaction. The difference is rate-and-term refinance enables you to include second and third mortgages in the amount refinanced.
4. Consider VA streamline refinance
Even with bad credit, you can refinance with a VA streamline refinance, also known as an Interest Rate Reduction Refinance Loan (IRRRL). You just need to already have a mortgage guaranteed by the Department of Veterans Affairs (VA).
A VA streamline typically requires that you give financial information like two years of W-2s, recent paystubs, and federal income tax returns. Mortgage lenders offering this option also require a home appraisal. Note: similar to FHA streamlines, VA streamlines must result in a net tangible benefit for the borrower.
But what if you are a veteran with a current mortgage that is not a VA loan? In that case, a VA-guaranteed cash-out refinance allows you to replace your current mortgage with a new one. It also enables you to take cash out of your home equity. (However, it still works even if you do not want to take cash out.)
