FHA Streamline Refinance: Process, Benefits And Rates
Miranda Crace4-minute read
February 25, 2021
If you currently have an FHA loan and your goal is to decrease your monthly mortgage payments, you might want to consider an FHA Streamline Refinance.
Let’s look at what an FHA Streamline is, how it works and the benefits it can provide.
What Is An FHA Streamline Refinance?
The FHA Streamline Refinance is a mortgage refinance product that can help homeowners with an FHA loan to lower their interest rate and reduce their monthly payment.
As the name suggests, an FHA Streamline is a relatively speedy and simplified process. Some borrowers are even able to skip the appraisal before closing.
Benefits Of An FHA Streamline Refinance
Here are some reasons you might want to consider an FHA Streamline.
Lower Your Monthly Payment
FHA Streamlines are a fast way to lower your monthly mortgage payment.
The FHA has strict guidelines regarding how you achieve the lower payment. For example, you can’t add more than 12 years to your loan term. If you do extend your loan term to lower your payment, you must also reduce your interest rate. It all comes back to achieving the net tangible benefit required for an FHA Streamline.
Refinance Even If You Owe More Than Your Home Is Worth
Unlike many mortgage refi options, an FHA Streamline allows you to refinance even if you owe more on your home than it’s worth.
The loan amount for your FHA Streamline is primarily determined by the outstanding principal balance of your loan – so if your home value has declined, you may still be able to use an FHA Streamline to refinance.
Limited Documentation and Credit Check
There are two types of Streamline refinances. The first is credit qualifying, where you provide income documentation and the lender performs a credit check. If your refinance happens to remove a borrower from the mortgage, you fall into this type of Streamline refi.
The second is non-credit qualifying. With this type of refinancing, your lender still checks your credit, but there are fewer factors your lender considers within your credit report. For a non-credit qualifying refinance, your lender may not need to verify your income. This makes for a faster, easier approval process.
You Won’t Need an Appraisal
A home appraisal is an unbiased estimate done by an appraiser to determine the fair market value of the home. FHA Streamlines generally don’t require an appraisal of the home because the loan amount is determined by what you owe – not the current home value.
Today’s FHA Streamline Refinance Rates
FHA Streamline refinance rates change often and may differ among borrowers, so it’s wise to compare current rates.
Rates might be offered as a 5-year ARM (adjustable-rate mortgage) as well as a 15-year or 30-year fixed loan. That said, here are some of the current rates you can expect.
Rate / APR
Pricing is currently not available for the selected value.
- Listed rates are offered exclusively through Rocket Mortgage.
- Mortgage rates could change daily.
- Actual payments will vary based on your individual situation and current rates.
- Some products may not be available in all states.
- Some jumbo products may not be available to first time home buyers.
- Lending services may not be available in all areas.
- Some restrictions may apply.
- Based on the purchase/refinance of a primary residence with no cash out at closing.
- We assumed (unless otherwise noted) that: closing costs are paid out of pocket; this is your primary residence and is a single family home; debt-to-income ratio is less than 30%; and credit score is over 720; or in the case of certain Jumbo products we assume a credit score over 740; and an escrow account for the payment of taxes and insurance.
- The lock period for your rate is 45 days.
- If LTV > 80%, PMI will be added to your monthy mortgage payment, with the exception of Military/VA loans. Military/VA loans do not require PMI.
- Please remember that we don’t have all your information. Therefore, the rate and payment results you see from this calculator may not reflect your actual situation. Quicken Loans offers a wide variety of loan options. You may still qualify for a loan even in your situation doesn’t match our assumptions. To get more accurate and personalized results, please call to talk to one of our mortgage experts.
FHA Streamline Refinance Requirements
Let’s look at the requirements you’ll need to meet to qualify for refinancing with an FHA Streamline.
Mortgage Loan Type
You must currently have an FHA mortgage to refinance with an FHA Streamline. You cannot use an FHA Streamline to refinance an existing conventional loan or any other loan type.
Net Tangible Benefit
To get an FHA Streamline, the refinance must offer you a net tangible benefit. This means that the refinance must be beneficial to you according to the FHA’s guidelines.
The definition of the net tangible benefit varies based on the details of your loan, but here are some general guidelines:
- If you’re reducing the term of the loan, your new interest rate must not be higher than your current rate. Additionally, your new mortgage payment (including principal and interest, and your mortgage insurance premium) must not exceed your old payment by more than $50.
- If you’re not reducing the term of the loan, there are guidelines regarding how much your interest rate and mortgage insurance premium rate can increase or decrease.
There are a few guidelines for how long you must wait between getting your FHA mortgage and doing an FHA Streamline refinance:
- You must have made at least six payments on your FHA mortgage.
- At least 6 full months must have passed since the first payment was due on the mortgage.
- At least 210 days must have passed from the closing date of the mortgage you’d like to refinance.
You must be in good standing with your current mortgage. Here’s what that means:
- In the past 6 months, you’ve had no payments that were more than 30 days late.
- In the past 12 months, you’ve had no more than one payment that was more than 30 days late.
As with most refinance options, the FHA Streamline Refinance requires closing costs, which can’t be wrapped into the new loan. However, some lenders will agree to pay your out-of-pocket closing costs – and charge you a higher interest rate in exchange.
No Cash Back
You can’t use an FHA Streamline to take more than $500 cash out. FHA Streamlines are intended to help you lower your mortgage payment, so if you’re interested in taking cash out, you’ll need to choose another loan type.
You’re required to pay a mortgage insurance premium (MIP) with both an FHA loan and an FHA Streamline. When you first get an FHA loan, you pay MIP, which protects your lender if you default on your loan. You’ll continue to pay MIP when you refinance. If you’re looking to stop paying mortgage insurance, a conventional loan may be a better choice, depending on how much equity you have.
Is Applying For An FHA Streamline Refinance Right For You?
If you’re in good standing with your current FHA loan, you may qualify for an FHA Streamline to lower your mortgage payment. If you meet the requirements for an FHA Streamline, you can speed up the process of getting your mortgage refinanced. The streamlined process will allow you to refinance an appraisal, and maybe also without income verification.
Rocket Mortgage® doesn’t currently have mortgage solutions for FHA Streamlines, but we may be able to help you explore other options, such as refinancing to a conventional mortgage.
Still have questions? Contact a Home Loan Expert now.
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