As we all know, lenders can be pretty antagonistic when it comes to approving loans.
So how could they be a little more relaxed with streamline refinancing.
The main reason why such practices are possible is that the loan process makes use of information:
- Provided in the initial loan application
- Existing customer information as the borrower is already a client of the lender
So even though refinancing a housing loan effectively replacing an existing loan with a new loan, leeway is given to the borrower in documentation requirements as material information is already available for the lender to assess.
Some of the essential information that might be drawn from such sources include:
- Payment history
- Credit record
- Income verification
- Assets verification
The minimization of documentation not only results in a faster processing time, but also potentially a significant cut on settlement costs.
However, borrowers should take note that streamlined refinancing is only eligible for straight refinancing of the loan balance.
Borrowers will have no option of cash out refinancing.
The 3 major programs for streamlined refinancing are via:
They each have their own qualification and eligibility criteria that borrowers must meet.
Even though such programs can often lead to a reduction in interest rate on a borrower’s home loan, it is not a given.
Homeowners should still proceed with caution and run the numbers of whether going ahead will actually be worthwhile financially.
The break even point should undoubtedly be evaluation as it’s a key consideration for any decision to refinance.