FHA Streamline Refinances

FHA streamline refinances emerged onto the mortgage scene in the early 1980's. Since then, thousands of FHA home owners have utilized this program to lower their interest rate with fewer costs and relative ease.  

A streamline refinance refers only to the amount of documentation and underwriting that is conducted on a loan file by the mortgage company. Mortgage companies may offer FHA streamline refinances at "no cost" (actually no out-of-pocket expenses to the borrower) by charging a higher interest rate on the new loan. Other companies may offer streamline refinances that wrap the costs into the new mortgage amount. Unfortunately, there must be sufficient equity in the property. Before deciding which option best fits your needs, it is important to weigh not only the costs but also the long term impact that a higher rate or a higher mortgage payment will have.

FHA streamline refinances do not require credit underwriting, unless the principal balance is increasing, in which case, HUD requires a 12 month payment history. New individuals may be added to title on a streamline refinance without credit review. Deleting individuals from title on a streamline refinance may require qualification (certain exceptions may apply).

The following are basic requirements of a FHA streamline refinance:

• The mortgage to be refinanced must already be FHA insured

• The borrower must have been making the mortgage payments on time

• The refinance must lower the principal and interest payment of the previous mortgage payment

• The borrower may not receive cash from loan proceeds

• Any subordinate financing may remain in place as long as it is subordinated on title.

• The loan must have owned the property and had the FHA mortgage for at least six months to be eligible

• The term of the new mortgage must be the lesser of 30 years or the unexpired term of the mortgage plus 12 years.  A borrower cannot refinance from a 15 year loan to a 30 year loan.

• An appraisal is not required unless the closing costs are wrapped into the loan.  Streamline refinances without an appraisal are limited to the unpaid principal balance, minus any refund credit of the mortgage insurance premium (MIP), plus the new upfront MIP if it is to be financed in the mortgage.

• No termite report is required

• The borrower cannot be late, delinquent, or in default of any federal debt.