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FHA STREAMLINE REFINANCE

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

MINIMUM CREDIT
SCORE

660

MINIMUM CREDIT SCOREKEY ADVANTAGES

NO APPRAISAL REQUIRED NO INCOME VERIFICATION

How does the FHA Streamline work?

According to the U.S. Department of Housing Urban Development, the basic requirements of a streamlined refinance are the following:
  • The mortgage loan to be refinanced must be an FHA loan
  • The FHA mortgage loan to be refinanced must be current
  • The results of the refinance must net tangible benefit to the borrower. The outcome of a net tangible benefit varies from each borrower based on the type of loan being refinanced and the interest rate and/or term of the new loan
  • If borrowers use a streamlined refinance, cash over $500 may not be taken out on refinanced mortgages

Streamline refinances can be offered in several ways. First, lenders can offer “no-cost” refinances, which require borrowers to pay no out-of-pocket expenses. Instead, lenders will issue a higher interest rate on the new loan if the borrower decides to pay for the closing costs in cash.

Because of this, lenders pay for any closing costs that occur during this transaction. According to the FHA, lenders are not allowed to include closing costs in the new mortgage amount of a streamlined refinance. Simply put, using an FHA streamline refinance allows current FHA loan borrowers the option to lower the rate on their mortgage without meeting an extensive list of criteria.

What are the FHA Streamlie programs?

FHA streamline is a refinancing program for current homeowners who have an FHA loan. If current FHA borrowers decide to refinance their mortgage, they can either refinance as a five-year adjustable-rate mortgage (ARM), or a 15, 20, 25, or 30-year fixed-rate loan. This program can be utilized under certain qualifications, such as:

  • Today’s mortgage rates are lower than your current mortgage rate
  • Homeowners owe more money than the home is worth

Depending on how much money is owed, your financial situation, and how long you anticipate living in the home, it will dictate which rate option is best for you.

What are FHA Streamline refinancing costs?

Most commonly, borrowers will be required to pay for closing costs when they refinance an FHA streamline. The only difference with streamline refinancing closing costs is that it does not require homeowners to pay for an appraisal. Homeowners can expect to pay between $1000 and $5000 for FHA streamline refinancing closing costs. But, keep in mind this amount could be higher or lower depending on your new loan amount, down payment, and other factors.

If borrowers were to make a down payment of less than 20 percent of the home’s value, their lender will require them to purchase private mortgage insurance (PMI). Lenders can make borrowers pay for this premium upfront and add it to their new loan estimate. This mortgage insurance only protects the lender if the borrower stops making payments.

If you are interested in refinancing your current FHA loan or have any questions, reach out using the contact information below.

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