The FHA streamline refinance has been one of the most popular refinancing program for over 3 decades now. If you hold an FHA mortgage now, you have the option of refinancing with the FHA Streamline Refinance program. This popular FHA refinance program can make a lot of sense in certain situations, especially for those who are locked into an interest rate that is considerably higher than current rates. Many homeowners that have an existing mortgage insured by the FHA are unaware of their eligibility for this exclusive refinance program.
FHA Makes It Easy to Refinance with the FHA Streamline Loan Program
There are many advantages of the FHA Streamline Refinance that include:
Low Streamline Refinance Rates: Currently averaging 5.875% (6.520% APR), these rates are notably competitive within the mortgage industry.
No Appraisal: The FHA Streamline Refinance is applicable even if your existing mortgage is underwater, eliminating the need for a property appraisal.
No Verification of Job or Income: Eligibility for FHA Streamline refinancing persists, even for individuals who have recently experienced job loss or a reduction in income.
No Credit Check: In many cases, lenders are offering the FHA Streamline’s non-credit qualifying option ensures that a low credit score doesn’t hinder the refinancing process feature seldom found in other refinancing options.
Lower MIP Rates: For those with an FHA loan obtained between 2010 and 2015, accessing today’s reduced annual mortgage insurance premiums is possible through FHA streamline refinancing.
MIP Refund: Utilizing the FHA Streamline Refinance may result in a refund of up to 68% of prepaid mortgage insurance, provided as an MIP discount on the new loan.
Ask your loan officer if you meet the eligibility requirements for the FHA streamline refinance program. Another significant benefit with the streamline program is that the Federal Housing Administration offers a partial reimbursement for the initial payment of the mortgage insurance premium (MIP) that you made when securing your existing FHA loan.
The main objective of the FHA Streamline Refinance is to simplify and decrease the expenses associated with refinancing an existing FHA loan. This popular program seeks to decrease interest rates, lower monthly payments, or transition from an adjustable-rate to a fixed-rate mortgage, ultimately enhancing the overall affordability of the loan. Find out if you meet the requirements for credit qualifying streamline refinance programs insured by the FHA.
FHA Streamline Rates Remain Attractive for Home Refinancing
The chief objective of the FHA streamline refinance program is to simplify and reduce the expenses associated with refinancing existing FHA loans. Its aim is to automate the process by eliminating traditional underwriting steps with appraisals and income documentation. The FHA streamline was also created to lower interest rates, curtail monthly payments, or transition from an adjustable-rate to a fixed-rate mortgage, ultimately enhancing the affordability of the loan.
Here are some great reasons to call a lending company today and check out an FHA streamline refinance loan.
#1 You Don’t Need an Appraisal with a FHA Streamline Refinance
One of the most important aspects generally of the FHA Streamline Refinance program is that you do not need as much paperwork and documentation. One of these items is that the lender does not need to order a new appraisal for the new loan. A new appraisal is usually ordered to ensure that the home is worth what is being loaned out. This ensure that the lender would be able to sell the home for what it loaned you if you default on your obligations.
However, with an FHA streamline loan, the lender will use your original purchase price to represent the value of your home. This is a big deal because you do not have to worry about the appraisal coming in high enough, nor do you have to wait for the appraisal results to come back. You also may be eligible for a streamline refinance if you are underwater on your FHA loan.
#2 No Income or Employment Verification
This also is a huge deal because one of the reasons people may refinance is they need to save money due to a job loss, or a reduction in hours. If you don’t have as much income, you might be having trouble with the mortgage payment. But with regular refinances, you would have to prove your income and employment. If you have been making your mortgage payments regularly until now, FHA will not need to verify your employment or income again.
#3 Credit Score Waived, with Exceptions
FHA streamline refinance guidelines do not require a credit check for you to get a loan refinanced. However, some FHA streamline lenders might require you to have a credit score of 620. If you have poor credit due to a job loss, you may need to shop at several FHA approved lenders to find one that will do your refinance. Make sure you are talking to experienced companies that approved for FHA streamline refinances in your region.
#4 Streamline Rates Are Identical as Regular FHA
One of the major benefits of an FHA home loan is that the rate is below market in many cases. When you refinance, you can get the same rate as on your first mortgage. Many conventional refinance loans have a higher interest rate than a first mortgage. So, this can be a money saver for you. In most cases, FHA streamline rates are as low as any other programs for home refinancing.
#5 No Pre-Payment Penalty on FHA Streamlines
Some mortgage refinances will charge you a pre-payment penalty if you pay off your loan early. The FHA streamline refinance loans will not charge you a pre-payment penalty if you pay it off early. All of these reasons make getting a streamline refinance a good idea for many homeowners.
Before you pick up the phone to talk to your lender, you should know the requirements for getting a streamline refinance:
- The home you are refinancing has to be your primary residence.
- You may not have had more than one late payment in the last year.
- You must be totally current on your mortgage at closing.
- If you have an adjustable-rate mortgage, you have to be out of the introductory rate period before you can do FHA streamline refinance loans.
- You have to get some sort of tangible benefit by doing the refi. This means you need to have a lower mortgage payment, including interest and insurance by at least 5%.
- FHA streamline closing costs need to be paid with cash when you close, or paid for with adjusting to the financing, if the lender allows it. If this is done, you will have a slightly higher interest rate.
- With the Streamline, there is no ability to receive money or consolidate debt like you can with FHA cash out refinancing.
Also, if you think that you are going to move next year and you should not bother to refinance, this may not be the case.
An FHA Streamline Refinance has fewer costs than a traditional refinance, including no appraisal, so you may be able to break even on the new loan faster than you think. Like any loan, an FHA Streamline has advantages and disadvantages. Let’s break them down.
FHA Streamline Refinance Advantages
- You can qualify very easily for a streamline refinance. FHA loan financing is intended for people who have poor to average credit. If you have a credit score under 740 but above 640, you may look at conventional refinancing as well. If you have a credit score over 740, conventional financing is often better.
- No appraisal with FHA streamlines. As noted earlier, having no appraisal is a major advantage due to there being no question that the loan will go through, as far as the home’s value.
FHA Streamline Refinance Disadvantages
- Mortgage insurance: When you get a new FHA mortgage, you have to pay your upfront mortgage insurance premium again. If the loan to value is 78% or higher, you have to pay for mortgage insurance premiums each month. If your new loan was taken out after June 1, 2009, your mortgage premiums will be higher.
- Closing costs: All loans have closing costs. FHA states that you are not allowed to finance closing costs into the loan. You either have to pay in cash or you find a lender that will do a zero-cost refinance. This means that you will just pay a higher interest rate. So, you are still paying closing costs.
For the majority of FHA lien holders, an FHA-streamline refinance is a good option. It is very easy to qualify for, has relatively low costs, and the interest rate is very low. Most borrowers will be able to save hundreds of dollars per month. Remember that you may need to shop around for a lender that will work with your exact circumstances, but the FHA refinance loan will always be a good option for most people.
Requirements for the FHA Streamline Refinance Program
Homeowners in 2024 may continue to watch home prices climb in many markets, and interest rates fall, and wonder, “Is now a good time to refinance?”
If you are choosing to refinance with the FHA streamline program, one can make a strong argument to do it in 2024. Here are the most important reasons that you may want to do an FHA streamline refinance in 2024:
#1 FHA Streamline Interest Rates Remain Low
The Federal Reserve as of this writing just increased interest rates, but mortgage interest rates are still very low. In fact, rates have declined in 2019 even though the Fed has raised rates.
Today you still may be able to score an FHA streamline refinance rate at a competitive interest rate. That is a heck of a deal that can save you big each month in interest, and also over the long life of the loan.
If you have a current FHA loan rate that is .5% or more above current rates, you could benefit from a streamline refinance. Some borrowers are able to lower their payments by more than $100 per month.
#2 Mortgage Insurance Premiums May Drop
The Federal Housing Administration is weighing whether to drop mortgage insurance rates by .25% in 2019. If they decide that the FHA program is stable enough to do so, this could help to cut your monthly payment.
Even if the FHA decides against dropping mortgage insurance rates, you still may be able to lower your interest rate and possibly your mortgage insurance payment; this is due to a previous cut in the mortgage insurance interest rate.
The FHA streamline costs associated with FHA mortgage insurance are contingent on when a homeowner initially acquired their FHA lien:
For FHA mortgages secured prior to June 1, 2009: Homeowners are obligated to make an upfront payment equivalent to 0.01% of the loan amount, in addition to an annual premium of 0.55%.
For mortgages secured after June 1, 2009: Homeowners are required to pay an upfront premium of 1.75% of the loan amount, with an annual premium ranging from 0.45% to 1.05%.
#3 Interest Rates Could Rise Soon
The Federal Reserve has risen interest rates three times in the last year. At first, mortgage rates went up, but recently, they have fallen again. It still seems likely that the Fed will increase rates again in 2024, and this could cause mortgage rates to rise again.
It seems unlikely to us that mortgage interest rates are going to fall substantially in the near future. So, you may want to go ahead and lock in that low FHA refinance rate. Remember that FHA rates are usually under market rates, too, so you can score a really good deal.
#4 No Appraisal Is Needed
Some refinances are complicated, but that is not so with the FHA streamline refinance program. You do not need to get a new appraisal on your property. Your lender will use your most recent appraisal to get the value of the home. If you decide to do a cash out refinance though, you will have to pay for a new appraisal.
The lack of an appraisal can make this refinance through FHA very fast. It may only take two weeks and sometimes less. Learn how to refinance without an appraisal.
#5 No Credit Check Needed
Most lenders approved by FHA will not check your credit when you do a streamline refinance. If your credit score has gone down since you bought a home, this may not be an obstacle to getting a new lower interest rate. How to qualify for a FHA home loan in 2017.
#6 No Income Documentation
If you have lost your job or are working fewer hours, you will not have to worry about it for the purposes of refinancing. FHA streamline lenders will not verify your income on a streamline refinance.
Not having to have your income checked also will greatly speed up the time it takes to get an FHA streamline refinance done. The FHA streamline is the only no doc loan available today.
Updated FHA Streamline Requirements
This program is easy to qualify for, but you still will need to meet some very simple requirements:
- If your loan is under a year old, all payments must have been made on time.
- If your mortgage is more than a year old, you may not have more than ONE payment that was 30+ days late.
- The last three months’ payments must have been made on time.
- The FHA streamline refinance program has a waiting period of six months. You must have made a minimum of six on time payments on your current FHA mortgage. It also has to have been at least six months since your initial payment was due.
- The new loan must not surpass the original FHA mortgage amount.
- The refinance is not permitted to yield more than $500 in cash.
- To be eligible for FHA streamline refinancing, a minimum of 210 days’ worth of payments must have been made on the initial FHA mortgage.
Regarding closing costs, many borrowers opt to pay a slightly higher rate in exchange for the lender paying closing costs. If you do this, you may have next to no out of pocket costs to refinance your FHA mortgage.
You should expect to pay in the range of $1,000 to $5,000 in closing costs on your streamline refinance.
Take Away on FHA Streamlines
According to FHA guidelines, the FHA streamline refinance must offer a benefit to the borrower, achieved through either a reduction in the interest rate or a transition from an adjustable-rate mortgage to a fixed-rate mortgage. This streamline program accommodates higher loan-to-value ratios compared to many other home refinancing programs, making it accessible to borrowers with minimal or no equity in their homes.
The FHA streamline refinance process is a very easy way to enjoy a lower interest rate on your mortgage. While you cannot pull equity from the property, you can get a lower rate in many cases with a bare minimum of paperwork.
If you have a home loan backed by FHA and you think that you can save at least ½ of a point on your mortgage rate, you should strongly consider checking with your lender about the FHA streamline refinance program.