FHA Mortgages

What Is An FHA Streamline Refinance?

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An FHA Streamline Refinance can help you get a lower interest rate on an existing FHA insured home loan. In addition, they do not require a home valuation like most traditional refinancing options and can be easier to qualify than a conventional refinance.

Here’s a closer look at FHA Streamline Refinances and how you can qualify for one:

What is an FHA Streamline Refinance?

An FHA Streamline Refinance allows you to refinance your current FHA household loan and potentially lower your monthly payment.

It can be easier to qualify for an FHA streamline refinance than other mortgage refinancing options as there is less paperwork and the underwriting process is less rigorous.

For example, you don’t need a home valuation and may not need a credit check as your current FHA loan payment history is the primary qualification requirement.

As with your existing FHA mortgage, there may be closing costs. Although some lenders may offer “free” refinancing that does not require upfront closing costs, but instead charge a higher interest rate.

Credit qualifying vs. non credit qualifying

Your lender can apply to you for one of these FHA streamline refinance options:

  • Credit Qualification: Lenders require an income verification and qualifying credit score. You can qualify for the lowest mortgage rates and remove a borrower from the title for reasons other than divorce, separation, or death.
  • Non-Credit Qualifying: No income or credit check required. This is of course the faster and easier option. However, you may not get the best interest rates and you can only remove borrowers for legitimate reasons.

Regardless of whether you are going for a credit-qualifying or non-credit-qualifying refinance, the basic refinancing requirements are similar.

FHA Streamline Refinancing vs. FHA Cash Out Refinancing

An FHA Streamline Refinance only changes the rates and terms of your existing FHA loan balance. You can only withdraw up to $ 500 above your current loan amount by streamlining the FHA refinancing process.

On the other hand, you can access up to 80% of your home equity with an FHA cash out refinance. Non-FHA mortgages are eligible for FHA disbursement refinance, but they will undergo a credit check and home valuation.

FHA streamlined refinancing vs. conventional refinancing

An FHA streamline refinance may be easier to qualify if you have poor credit, as your current mortgage payment history is the dominant requirement. Repayment terms and interest rates are often competitive with traditional lenders.

The main benefit of refinancing into a conventional loan is that you can remove the FHA mortgage insurance with a qualifying down payment or home equity position. But to do this you typically need to have a credit score of at least 620. Lenders also need a home valuation and want a low debt-to-income ratio.

FHA streamline refinancing Conventional refinancing
credit-worthiness No credit check required 620+
equity capital No minimum 20% (if you want to avoid mortgage insurance or withdraw cash)
Appreciation Not required Once in a while
documentation Proof of employment or utility bill to prove that the apartment is your primary residence Credit reports, tax returns, pay slips, W-2s
miscellaneous
  • Must be current with mortgage payments
  • At least 6 months on-time payments must be made
  • Typically you need a debt to income ratio of 43% or less

FHA streamlines refinancing requirements

The FHA’s refinancing requirements are less stringent than other refinancing options as there are fewer income, credit and home valuation factors to consider.

Here are the minimum guidelines for the FHA Streamline Program:

  • FHA Insured Loans Only: Unlike an FHA Cash Out Refinance, only existing FHA borrowers can participate in the FHA Streamline Refinance Program.
  • Eligible Properties: In addition to an FHA insured mortgage, you must have a qualifying property type. Primary residences, HUD-approved secondary residences, and non-owner properties can qualify.
  • No late payment: Current FHA guidelines allow 30 days late payment in the past 12 months. However, your mortgage must be current and not have any late payments in the last six months.
  • Six Month Waiting Period: You must wait at least six full months after your first payment date before you can refinance your loan.
  • Tangible Net Benefits: You need a better interest rate, better payment term, or both for the loan to have tangible net benefits. Essentially, the numbers have to work in your favor. For example, you cannot shorten your term, but accept a higher interest rate.
  • Credit Score Requirement: The FHA does not require a minimum credit score to qualify for a bad loan. However, lenders may require a minimum credit rating for a streamline loan-qualifying refinance.
  • Income Check: Credit Qualifying Loans require an income check to qualify for the best FHA refinance rates.

You won’t find FHA refinancing rates at Credible, but if you’re looking for a cheap conventional refinancing loan rate we can help. It only takes a few minutes to compare personalized, pre-qualified rates from all of our partner lenders.

Find out if a refinance is right for you

  • Actual rates from multiple lenders – Get the actual pre-qualified installments in 3 minutes without affecting your creditworthiness.
  • Smart technology – We streamline the questions you need to answer and automate the document upload process.
  • End-to-end experience – Complete the entire origination process from price comparison to closing, all on Credible.

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Checking the prices does not affect your balance

Advantages and disadvantages of an FHA streamline refinancing

Here’s a closer look at the pros and cons of using the FHA streamline program.

advantages

  • No apartment appraisal: The fact that there is no appraisal of the apartment reduces the refinancing costs. You can also qualify for a refinance if your home value is less than your mortgage equity or the original purchase price.
  • Faster Approval Process: There is no income check, home appraisal, or credit check on a non-credit qualifying Streamline loan so you can enjoy a faster and easier approval process.
  • Relaxed Borrower Requirements: An FHA streamline refinance is generally easier to qualify than a traditional refinance. Lenders use your punctual payment history to determine your credit score, and the minimum credit score to qualify is lower.
  • Potentially Lower Monthly Payment: Refinancing to a lower mortgage rate results in a lower monthly payment and gives you some air in your finances.

disadvantage

  • FHA Mortgages Only: You can only refinance an existing FHA mortgage using the Streamline Refinance Program. However, homeowners on conventional, USDA, and VA loans are eligible for FHA disbursement refinancing.
  • Mortgage Insurance Premium: You will continue to pay an annual MIP for the life of the loan. An upfront mortgage insurance premium is also required, but you may be able to get a partial refund of your existing premium.
  • Closing costs: You are responsible for paying the closing costs out of pocket. A no-cost loan is available if you are willing to accept a higher interest rate as FHA credit guidelines prohibit the fees from being incorporated into the mortgage equity.
  • No Withdrawal Option: You can withdraw up to $ 500 with an FHA Streamline Refinance. However, FHA cash-out refinance may be a better option when you need your home equity for a significant expense, such as buying and selling home equity. B. for repairs at home.

Is FHA Streamline Refinance Right For You?

An FHA streamline refinance can be a great option if you want to avoid the traditional underwriting process and refinance your existing FHA loan. All you need to do is make sure that you are up to date with your mortgage and have passed the waiting period, and that the refinance is giving you a tangible net benefit.

When you’re happy with an FHA mortgage, a streamlined refinance can be the quickest, least stressful way to adjust your interest rate and repayment term.

However, do not rule out conventional refinancing. Traditional refinancing can be a better option for a number of reasons, including competitive rates and terms and the waiver of mortgage insurance premiums.

Here’s a quick breakdown if you’re still trying to decide whether to go for an FHA streamline refinance or a conventional refinance:

Best you … Refinancing option
Have 20% equity in your home Conventional
You want to withdraw cash Conventional
Don’t have a lot of credit Streamline
Do you want to get rid of mortgage insurance? Conventional
Cannot provide evidence of your employment or income Streamline

Continue reading: No Expert Opinion Refinancing: Is It Worth It?

About the author

Josh Patoka

Josh Patoka is a personal finance officer and contributor to Credible. His work has been featured on Fox Business and several award-winning personal finance blogs, including Well Kept Wallet, Wallet Hacks, and Frugal Rules.

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