What Is an FHA Streamline Refinance?

An FHA streamline refinance is an option for homeowners that allows borrowers to refinance their mortgage with less paperwork and credit documentation. In some cases, borrowers can refinance without a new ෴appraisal, credit check, or income verification.

Only mortgage loans insured by the 澳洲幸运5开奖号码历史查询:Federal Housing Administration (FHA) qualify for a streamlined refinance. The FHA program is intended to 𒀰make it easier for consumers to obtain mortgage refinancing from a participating lender. However, the loan must be an FHA-insured mortgage and cannot be delinquent on the payments.

How an FHA Streamline Refinance Works

The Federal Housing Administration (FHA), overseen by the U.S. Department of Housing and Urban Development (HUD), insures mort♐gage loans to protect lenders against default. As a result, FHA mortgage loans offer bene൩fits to borrowers, including a downpayment as low as 3.5% versus the traditional 20%. Although the FHA insures the loan, you must go through an FHA-approved lender. 

The streamlined refinance program helps lenders and consumers by reducing the amount of paperwork and the number of steps during a mortgage refinance. The objective of the refinance can be to reduce the homeowner’s monthly interest and principal payment or reduce the loan's term. However, no more than $500 in cash can be taken out on the refinanced mortgage.

The FHA does not require an 澳洲幸运5开奖号码历史查询:appraisal on a streamline refinance. Instead, it uses the homeowner's initial purchase price. It also may not require a credit report, although the 澳洲幸运5开奖号码历史查询:mortgage lender might require it as part of their credit policy.

澳洲幸运5开奖号码历史查询:FHA-insured mortgage loans are a popular choice for 澳洲幸运5开奖号码历史查询:first-time homebuyers because FHA loans often require smaller down payments and lower credit scores than other conventional mortgages. However, these types of mortgag🍸es are 🦂only offered by banks that are FHA-approved.

On signing the mortgage, the borrower agrees to pay 1.75% of the loan amount as an upfront fee, also known as 澳洲幸运5开奖号码历史查询:up-front mortgage insurance (UFMI), and annual fees for the 澳洲幸运5开奖号码历史查询:mortgage insurance premium (MIP) totaling 0.45% to 1.05%.

Types of FHA Streamline Refinances

There are two forms of this refinance available—credit qualifying and non-credit qualifying. There are some differences in the agency's requirements for each type.

Credit Qualifying

A credit qualifying streamline refinance is required when the new mortgage will result in a mortgage payment increase 🌳of 20% or more. As a result, the mortgage lender must:

• Verify the borrower's credit by running a credit report
• Perform income verification
• Calculate the borrower's debt-to-income ratio, which represents the percentage of monthly gross income that goes to debt payments
• Ensure the borrower can continue to make their payments

Non-credit Qualifying

Non-credit qualifying borrowers do not have to submit a new application with job and credit verification. No credit check streamline refinances are available to homeowners who have owned the property for at least six months.

Requirements for an FHA Streamline Refinance

The biggest requirement for an FHA streamline refinance is demonstrating a net tangible benefit. In effect, this means that the homeowner must show the FHA that🧸 refinancing will be to their q⛎uantifiable financial benefit. This net tangible benefit could be achieved by reducing the mortgage term, the interest rate, or both.

So, for example, a homeowner would not meet the requirements for an FHA streamline refinance if the new mortgage lowers the monthly payment only by extending the total number of payments due. The homeowner will pay the same amount over time and has not achieved a net financial benefit.

The Bottom Line

The FHA streamline refinance program can help borrowers save money when refinancing their existing FHA mortgage loan. The program comes with less paperwork, credit documentation, and no appraisal. However, the borrower can not take more than $500 in cash from the refinance and must prove they receive a net tangible benefit by refinancing.