What You’ll Learn
What is an FHA Streamline refinance?
Who can benefit from an FHA Streamline refinance
Types of FHA Streamline refinances
Pros and cons of an FHA Streamline Refinance
FHA Streamline refinance qualification criteria
If you have an existing FHA loan and are considering refinancing, you might have heard about the FHA Streamline refinance program. But what exactly is it, and how can it benefit you? Let’s break it down.
What is an FHA Streamline refinance?
An FHA Streamline refinance is a specific type of refinance offered by the Federal Housing Administration for those who already have an FHA loan. It offers a more streamlined process compared to a conventional refinance, with fewer requirements and faster processing.
Who can benefit from an FHA Streamline refinance?
FHA Streamline refinances can benefit those who want to:
Lower their monthly payment: Refinancing can help reduce your mortgage payments by reducing your interest rate or lengthening your loan term.
Switch from an adjustable-rate mortgage: Moving to a fixed-rate mortgage provides payment stability.
Shorten their loan term: Shortening your loan term pays off your mortgage faster and means you pay less interest over the life of your loan.
Types of FHA Streamline refinances
There are two main types of FHA Streamline refinances:
- Non-credit qualifying FHA Streamline: This type doesn’t require income verification or appraisal.
- Credit-qualifying FHA Streamline: This version requires income verification but does not require an appraisal, and is typically required when you are removing someone from the mortgage.
Pros of an FHA Streamline Refinance
It’s a government-insured loan: You retain the security of your FHA-backed mortgage.
Faster and easier process: With fewer documentation requirements, refinancing is quicker.
No appraisal required: Simplifies the process and saves time.
No income verification: Income verification not needed in most cases, though employment verification is required. (Applies to non-credit qualifying FHA Streamline only)
Easier credit qualifications: You can qualify with a 580 credit score, whereas conventional loans require a credit score of at least 620.
No debt-to-income requirements: Your debt-to-income ratio doesn’t affect your eligibility. (Applies to non-credit qualifying FHA Streamline only)
You can owe more than your home’s value: There are no loan-to-value requirements, so you can be ‘underwater’ on your home and still refinance.
Competitive interest rates: FHA rates may be more favorable than conventional rates, especially if you have a lower credit score.
Lowering your mortgage insurance (MIP) payments: You may be able to lower your mortgage insurance premium, which is required for all FHA-insured loans.
Cons of an FHA Streamline Refinance
You must already have an FHA Loan: This refinance is only available to those with existing FHA loans.
Mortgage insurance costs: You will still need to pay upfront and ongoing mortgage insurance.
No rolling in your closing costs: You cannot roll your closing costs into your mortgage payment, so you’ll need to pay these upfront.
FHA Streamline refinance vs. conventional refinance
So, when should you consider a conventional refinance versus an FHA Streamline?
Consider a conventional refinance if:
You have a strong credit score: Compare rates between an FHA Streamline and conventional refinance to see which gives you more favorable terms, still taking into account the ease and speed of the FHA Streamline.
You want to take cash out: FHA Streamlines don’t allow cash-out refinancing.
You have a lot of equity in your home and want to stop paying mortgage insurance: FHA Streamlines require mortgage insurance. A conventional refinance would allow you to remove your mortgage insurance if you have at least 20% equity in your home.
Qualification criteria
To qualify for an FHA Streamline refinance:
Your existing mortgage must be FHA-insured and current.
The refinance must result in what the FHA calls a ‘net tangible benefit’, such as a lower rate, a switch from an adjustable to a fixed rate, or a shorter loan term.
You cannot take out more than $500 in cash (except in Texas, where cash-out is not permitted).
The property must be a primary residence and not listed for sale.
See your FHA Streamline refinance options today
FHA Streamline refinances offer a streamlined and accessible way to improve your mortgage terms if you’re already an FHA loan holder. Take the first step with our digital pre-approval today. It takes as little as 3 minutes to see your rates, and does not impact your credit score.
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