FHA Streamline Refinance
The FHA streamline refinance program is for homeowners who have existing FHA loans. It allows eligible homeowners to refinance at a lower mortgage rate with no income verification, appraisal, or credit check. Those who use this program can also get a refund of up to 68% of their original insurance payment.
What is a FHA Streamline Refinance?
It is a special refinance product which is reserved for homeowners that currently have an FHA mortgage. It is the quickest and simplest way for an FHA-insured homeowner to refinance their mortgage.
There are a number of benefits of the FHA Streamline program, some of them include:
- Low refinance rates
- Lower MIP rates
- MIP refunds
- No appraisal necessary
- No verification of income
- No credit check
The FHA Streamline refinance should be your first choice if you currently have an FHA home loan and want to refinance at a lower rate. There are no other products that match its benefits.
How Does the Program Work?
In general, the FHA Streamline works like other refinance programs. It is available as a fixed rate or as an adjustable-rate mortgage. There’s no FHA prepayment penalty to worry about and it comes as a 15 or 30 year term.
This product cannot be used to refinance a 30-year loan into a 15-year loan. However, it can be used to extend a 15-year mortgage in to a 30-year mortgage. By doing this, the monthly payments lower even further.
Another beneficial feature is that rates for the FHA Streamline are the same as rates for a regular FHA loan. There is no penalty for being underwater on your home, or for having very little equity.
Advantages of the FHA Streamline
The fact that the FHA Streamline doesn’t require a home appraisal is the biggest distinguishing fact between it and most traditional refinance programs. The FHA Streamline refinance allows you to use your original purchase price as your home’s current value, regardless of what its currently worth.
So, the FHA doesn’t care if you’re underwater on your mortgage. An underwater mortgage is a home purchase loan with a higher principal than the free-market value of a house. The FHA Streamline program actually encourages underwater mortgages.
Another huge plus is that it’s fairly easy to qualify for. The FHA got rid of most of the typical verifications required to get a mortgage in an effort to help U.S. homeowners. Therefore, income and employment verification is not required and neither is credit score verification.
Are You Eligible for an FHA Streamline Refinance?
While the FHA Streamline deliberately avoids traditional mortgage standards, the program does enforce certain minimum standards for applicants. These include:
- At least 210 days since your last refinance
- Perfect, 3 months payment history
- The refinance must have a purpose
- Usually you have to lower your rate by at least 0.50%
While it’s easy to qualify for, expect to pay closing costs out of pocket. This program does not allow you to roll closing costs into the amount of the loan. In addition, with an FHA Streamline, you cannot do a cash-out refinance.