If your current mortgage loan is insured by the Federal Housing Administration (FHA) and you are considering refinancing that loan in order to lower your mortgage payment, the FHA may have a refinance program that is right for you. It is called an FHA streamline refinance loan.
What is an FHA Streamline Refinance Loan?
This program from the FHA has existed since the early 1980s. The program “streamlines” the refinance process for an existing FHA mortgage. It makes the refinancing process quicker and easier for the borrower by reducing the amount of documentation and underwriting that needs to be performed by the lender.
Qualifying for FHA Streamline Refinancing
There are some basic requirements that everyone must meet in order to qualify for a streamline refinance through an FHA-approved lender. They include:
- The mortgage being refinanced must be an FHA-insured loan
- The mortgage being cannot be deliquent.
- The refinance must result in a lower monthly payment – principal and interest.
- The refinance cannot include cash-out (i.e. you cannot refinance any equity built up in the home, only the remaining principal and closing costs, if applicable).
If your refinancing situation meets the above requirements then chances are you can qualify.
Closing Costs for FHA Streamline Refinances
The FHA streamline refinance program is not free. There are closing costs involved similar to those of other mortgage refinance loans, but there are ways to avoid paying closing costs to the lender ”out-of-pocket”:
- Your lender may agree to pay the closing costs if you agree to pay a slightly higher rate than you would have received if you were paying for closing the loan.
- If you have sufficient equity in your home then the lender can roll your closing costs into the new mortgage amount.
If you would prefer to pay closing costs “out-of-pocket” then your lender will allow that as well.
FHA Streamline Refinances Without Appraisals
There are some situations when an appraisal may not be required for a streamline refinance:
- You can qualify for a streamline refinance without an appraisal if the new loan amount does not exceed the original loan amount.
- If you own an investment property that was financed using an FHA-insured mortgage and do not reside there then that property can ONLY be refinanced without an appraisal.
Refinancing your FHA mortgage without an appraisal can be a big advantage to the borrower if the home has declined in value.
