FHA STREAMLINE REFINANCE

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. These loans require lower minimum credit scores and down payments than many conventional loans, making them especially popular with first-time homebuyers. According to the FHA’s 2020 Annual Report, more than 83 percent of all FHA loan originations were for borrowers purchasing their first homes

MINIMUM CREDIT
SCORE

KEY
ADVANTAGES

NO APPRAISAL REQUIRED NO INCOME VERIFICATION

How does the FHA Streamline work?

According to the U.S. Department of Housing and Urban Development (HUD), the basic requirements for a streamlined refinance are as follows:

The mortgage loan to be refinanced must be an FHA loan.
The FHA mortgage loan being refinanced must be current.
The refinance must provide a net tangible benefit to the borrower. The definition of net tangible benefit varies depending on the type of loan being refinanced and the interest rate and/or term of the new loan.
If borrowers use a streamlined refinance, they cannot take out more than $500 in cash on the refinanced mortgage.

Streamline refinances can be offered in several ways. For example, lenders may offer “no-cost” refinances, where borrowers pay no out-of-pocket expenses. Instead, the lender might charge a higher interest rate on the new loan if the borrower opts not to pay the closing costs in cash.

In such cases, the lender covers any closing costs incurred during the transaction. According to FHA guidelines, lenders are not allowed to include closing costs in the new mortgage amount of a streamlined refinance. Simply put, an FHA streamlined refinance allows current FHA loan borrowers to lower the interest rate on their mortgage without having to meet an extensive list of criteria.

What are the FHA Streamlie programs?

The FHA Streamline program is a refinancing option for current homeowners who have an FHA loan. If existing FHA borrowers decide to refinance their mortgage, they can choose between a five-year adjustable-rate mortgage (ARM) or a fixed-rate loan with a term of 15, 20, 25, or 30 years. This program can be utilized under certain conditions, such as:

Today’s mortgage rates are lower than your current mortgage rate.
Homeowners owe more on their mortgage than the home is currently worth.

The best refinancing option for you will depend on factors such as how much you owe, your financial situation, and how long you plan to stay in the home.

What are FHA Streamline refinancing costs?

When refinancing through the FHA Streamline program, borrowers are typically required to pay closing costs. The key difference with streamline refinancing is that it does not require homeowners to pay for an appraisal. Homeowners can expect to pay between $1,000 and $5,000 in closing costs for an FHA streamline refinance. However, this amount could be higher or lower depending on factors such as your new loan amount, down payment, and other variables.

If borrowers make a down payment of less than 20 percent of the home’s value, their lender may require them to purchase private mortgage insurance (PMI). Lenders can charge this premium upfront and include it in the new loan estimate. It’s important to note that PMI only protects the lender in case the borrower stops making payments.
If you are interested in refinancing your current FHA loan or have any questions, please reach out using the contact information below.

MINIMUM CREDIT SCORE