FHA Streamline Refinance
The FHA Streamline Refinance is reserved for homeowners with existing FHA mortgages and provides a path of least resistance for homeowners with their eye trained to mortgage payment savings.
With all of the above, it makes perfect sense for HUD to allow FHA borrowers to reduce their interest rate or flip their loan from an adjustable rate to a more stable fixed rate via a streamlined refinance process.
Itâ€™s good for FHA borrowers, but it is also good for HUD and FHA mortgage lenders because a reduced monthly payment equals less risk of default.
So, how does it work and how do you qualify?
How the FHA Streamline refinance works
- FHA Streamline is a refi for homeowners currently in an FHA loan
- â€śCash-Outâ€ť not available (less than $2,000 only)
- No appraisal required
- Reduced documentation
- Minimal credit requirements
Is an FHA Streamline refinance right for you?
If youâ€™re in an FHA loan now and:
- You are looking to reduce your monthly mortgage payment
- You want to change from your adjustable rate mortgage into a more secure fixed rate mortgage
- Your current mortgage rate is higher than todayâ€™s mortgage rates
- You owe more on your mortgage than your home is worth
When appraised value gets involved youâ€™re doing a standard FHA refinance that usually requires full documentation of income and assets to qualify. A different animal than the reduced doc FHA streamline.
For most homeowners, the â€ślast known valueâ€ť is the appraised value of the home at the date of purchase.
Normally, a 30-year FHA mortgage with the standard 3.5 percent down payment will reach 78% LTV in around 11 years. A 15-year fixed with 3.5 percent down would reach 78% LTV in less than three years.
Like mortgage insurance and product guidelines, personal situations change and – despite the fact the FHA streamline is a hugely useful mortgage product – you may be able to maximize your refinance savings through another loan program.
Always talk to your agent so they can guide you through the pros and cons of a variety loan options – including the FHA Streamline Refi.
Frequently Asked Questions About the FHA Streamline Refinance Process
The FHA streamline loan does not require proof of income by W2s or tax returns. Most other types of loans require the lender to determine the borrowerâ€™s ability to afford the new monthly payments.
FHA streamline loans do not require an appraisal. The homebuyer can save $350-$550 or more. The lender uses the original purchase price of the home as the current value.
No. The FHA streamline refinance does not allow cash out at closing. The loan amount will total the outstanding loan balance plus a new upfront mortgage insurance premiums.
FHA streamline refinance loans do not require you to occupy the property, but upon request you must provide evidence that you did at one time.
Ask your lender if they can provide a credit for closing costs. The lender can typically credit all or part of your closing costs on an FHA streamline.