Streamlining an FHA Mortgage

An FHA streamline refinance is an option if you currently have a mortgage insured by the Federal Housing Administration (FHA). The FHA streamline process is somewhat similar to refinancing a loan through any other mortgage lender, but there are several important differences that make this an attractive option. Overall, the streamline process requires less paperwork and documentation, which usually makes it an easier way to refinance a loan than going through a traditional mortgage lender.

In order to get an FHA streamline loan, you will need to meet a variety of eligibility criteria. Furthermore, you should be prepared to pay fees when completing the refinance, unless you find a lender that will allow you to pay a higher interest rate, in exchange for covering your closing costs. Below, learn more about the streamline refinance process, and discover whether you can benefit from using this option once you have surpassed learning how to get an FHA loan.

The Benefits of an FHA Streamline Loan

One of the best benefits of the FHA streamline program is that it saves your time by cutting down on paperwork. Because you already have an FHA loan, your refinance lender will not need to verify your income or assets, as it would when originating a new loan, nor will the lender need to do an appraisal.

Furthermore, you may get better FHA streamline rates by choosing this option, as long as the current market interest rates are lower now than they were when you took out your mortgage. In addition, you may receive additional time to pay off your loan when you refinance it through this process, as opposed to using a conventional refinancing option.

The benefits you get from streamlining an FHA loan will vary, depending on your individual situation. When deciding if this refinancing option is right for you, it is important to compare the benefits to those you would receive by using a conventional refinancing program.

FHA Streamline Refinance Eligibility Requirements

Before you can streamline an FHA loan refinance, you will need to meet several eligibility requirements. You are only allowed to use this program if all of the following are true:

  • You already have an FHA-insured mortgage
  • You are up-to-date on your mortgage payments
  • You do not want to take cash out of your mortgage during the refinance process
  • Refinancing your home through the program would provide a “net tangible benefit”

While the first three requirements for an FHA streamline are straightforward, the fourth is a little more complicated, because it varies for each borrower. A “net tangible benefit” is simply something helps a homeowner out in the long run. What counts as a “benefit” will vary, depending on a homeowner’s individual situation.

Learn more about FHA loan requirements by downloading our free guide.

The FHA does not stipulate that you meet any income or credit score requirements. However, individual FHA streamline refinance lenders may have their own requirements when it comes to credit scores and other criteria, which may affect your eligibility.

How much does it cost to streamline refinance FHA loans?

In most cases, the FHA streamline process is not free. The term “streamline” may make it seem like certain aspects of refinancing a loan – such as paying closing costs – would be eliminated by using this option. However, you should be prepared to cover certain costs during any refinancing transaction.

When discussing the process of streamlining an FHA refinance, it is important to note the difference between streamlining a loan with and without an appraisal. When you do get an appraisal during the refinance process, you can usually lump your closing costs in with your loan.

While streamlining without an appraisal may make the refinancing process simpler, you cannot generally combine your closing costs with your loan using this option, unless you agree to pay a higher interest rate. This is referred to as a “no-cost” refinance, and not all lenders offer it. To avoid an increased interest rate, you must pay your closing costs out-of-pocket, instead.

What are the FHA streamline refinance rates and terms?

If you choose to streamline refinance your home, you will usually receive a lower interest rate, a lower monthly payment, or both. The rates and terms you receive will vary, depending on the type of mortgage you originally had and whether you are switching to a new type of mortgage during the refinancing process.

You may also receive different rates if the current market interest rate is lower than the interest rate was when you took out your loan. In any case, you will usually have the option of switching from one type of mortgage to another if you would receive benefits for doing so.

How to Start an FHA Streamline Refinance

The FHA, itself, does not directly refinance loans. Instead, the process is carried out by individual lenders. Once you are ready to refinance your home, you will need to start by finding an FHA-approved lender, including the one that originally assisted you, or by finding a different lender with which to work.

When doing an FHA streamlined refinance, lenders are required to follow FHA policies. However, the exact steps for refinancing a loan will vary, depending on the lender than you choose. Therefore, there is no single, standard procedure to follow.

Where can I find FHA streamline refinance lenders?

There are many different FHA-approved lenders to choose from once you are ready to refinance your home. When completing the FHA streamline process, you do not need to work with the same lender who originated your loan, unless you choose to do so. Instead, you are allowed to use any lender that is certified to work with FHA loans.

Keep in mind that lenders each have their own policies when it comes to determining your eligibility and approving your refinancing application. For example, some lenders may only work with clients who have a credit score above a certain amount, even if the FHA does not specify the exact credit score you need to have. If you are turned down by one provider, you can always apply for refinancing by choosing another lender.

Learn more about finding a lender by reading our detailed guide.