FHA Streamline Refinance Program
- FHA Streamline Refinance Program Key Considerations
- No income, employment or credit score verification required to qualify for FHA Streamline Refinance Program
- No maximum loan-to-value (LTV) ratio or appraisal report
- Saves borrower money and time
- Underwater borrowers eligble
- No borrower income limits
- Strict loan eligibility requirements
- Extra upfront and ongoing cost of FHA mortgage insurance premium (MIP)
- FHA loan limits
- FHA Streamline Refinance Program Overview
- How the FHA Streamline Refinance Program Works
- FHA Streamline Refinance Program Eligibility
- FHA Streamline Refinance Borrower Qualification Requirements
- Related FREEandCLEAR Resources
The FHA Streamline Refinance Mortgage Program enables borrowers to refinance an existing FHA mortgage with significantly fewer borrower qualification requirements and less documentation than a standard mortgage refinance. The FHA Streamline Refinance program is designed to make it easier for FHA borrowers to refinance into a more affordable mortgage with a lower monthly payment. The main differences between an FHA Streamline Refinance and a standard mortgage refinance are that the FHA Streamline Program does not require borrowers to verify their employment, income or credit score. Additionally, the program does not apply maximum borrower debt-to-income or loan-to-value (LTV) ratios. This means that borrowers are not required to provide their credit report or obtain a property appraisal which enables more borrowers to refinance their FHA loans and saves them significant money and time. The program's limited qualification requirements make it well-suited for borrowers who are underwater on their homes and who cannot refinance using standard mortgage programs.
Borrowers apply for the FHA Streamline Refinance Program through approved lenders such as banks, mortgage banks, mortgage brokers and credit unions. These approved lenders make sure that applicants meet program eligibility requirements and qualify for the loan according to the FHA's borrower qualification policies. Even if your current lender offers FHA streamline refinances you are not obligated to work with that lender when you refinance and you should shop your mortgage business to find the mortgage with the best terms. Click on a lender in the table below or INTEREST RATES to contact lenders about the FHA Streamline Refinance Mortgage Program.
We review the key FHA Streamline Refinance Program eligibility guidelines below:
To qualify for the FHA streamline refinance program borrowers must be current on their mortgage and not delinquent.
Borrowers cannot have any missed or late mortgage payments within the three months prior to applying for the FHA Streamline Refinance.
The mortgage you refinance must be an FHA loan. If you do not have an FHA mortgage you can still refinance your existing loan with a new FHA mortgage but you cannot use the FHA streamline refinance program.
Borrowers must currently live in the property being refinanced.
New Monthly Mortgage Payment and Net Tangible Benefit
According to FHA Streamline Refinance Program guidelines, your new FHA loan must provide a "net tangible benefit." This basically means that your new FHA loan must result in a lower monthly mortgage payment than your current FHA loan, unless you are refinancing an adjustable rate mortgage (ARM) into a fixed rate mortgage. If you are refinancing an ARM into a fixed rate mortgage, your monthly payment may increase moderately as a trade-off for the increased certainty a fixed rate mortgage provides borrowers.
The mortgage rate on FHA loans is usually .125% - .500% lower than the interest rate for most conventional mortgage programs because the loans are insured by the U.S. government. In most cases with the FHA Streamline Refinance Program your new interest rate is lower than your existing rate.
Loan-to-Value (LTV) Ratio
The FHA streamline refinance program does not apply a maximum loan-to-value (LTV) ratio which makes it ideal for FHA borrowers who are underwater on their homes (mortgage balance is greater than the value of their property). It is usually impossible to refinance your mortgage if you are underwater on your home. Because the program does not use a maximum LTV ratio, lender do not require an appraisal report which saves borrowers money and time.
15 and 30 year fixed rate mortgages and certain adjustable rate mortgages (ARMs) are eligible for the FHA Streamline Refinance Program. Interest only mortgages are not allowed.
Except for including the cost of the upfront FHA mortgage insurance premium (MIP), your mortgage balance cannot increase which means you are required to pay for all other closing costs out of pocket or use a "no cost" mortgage. For example, if your current mortgage balance is $153,000 then your new FHA loan amount can be no greater than $153,000 plus your upfront FHA MIP fee. Please note that if you select a "no cost" mortgage, your closing costs are included in the mortgage amount but you pay a higher interest rate, which may end up costing you more money over the life of the loan.
Your new FHA loan amount cannot exceed the FHA loan limit for the county in which the property is located. FHA loan limits vary by county and by the number of units in the property being financed. In the contiguous United States, the FHA loan limit for a single unit property such as a home or condominium ranges from $294,515 to $679,650 for high cost areas and the limit for a four unit property ranges from $566,425 to $1,307,175. In Alaska, Hawaii, Guam and the U.S. Virgin Islands FHA loan limits range from $1,019,475 for a single unit property to $1,960,750 for a four unit property.
Type of Refinance
The FHA Streamline Refinance Program only permits rate and term refinancings which means that the only terms of your mortgage that can change are your mortgage program, interest rate and mortgage length. In most cases FHA Streamline refinance borrowers lower their interest rate but keep their mortgage term the same with their new loan. Cash-out refinancings are not allowed through the program although the borrower can take-out $500 in proceeds from the mortgage.
FHA Mortgage Insurance Premium (MIP)
FHA Streamline Refinance borrowers are required to pay an upfront and ongoing monthly FHA mortgage insurance premium (MIP). FHA MIP pays for insurance that protects lenders in the event that borrowers default on their mortgage. The up-front FHA MIP can be added to your loan amount while the ongoing monthly MIP is an extra cost on top of your mortgage payment. For an FHA Streamline Refinance, the upfront FHA MIP for most loans that closed after May 31, 2009 is 1.75% of the mortgage amount while the upfront MIP for loans that closed before May 31, 2009 is only .01% of the loan amount, so the upfront MIP is significantly discounted for loans that closed before May 31, 2009.
Borrowers may be able to receive a partial refund of the upfront FHA MIP they paid on their original mortgage if they refinance into a new FHA loan within three years. Any refund is applied to the upfront FHA MIP for their new loan. The upfront MIP refund diminishes over the course of the three years with borrowers eligible to receive an 80% refund if they refinance within one month of closing their original FHA loan and a 10% refund if they refinance in the 36th month after closing.
For an FHA Streamline Refinance, the ongoing FHA MIP for mortgages that closed before May 31, 2009 is .55% of the loan amount , regardless of mortgage length. The ongoing FHA MIP for mortgages that closed after May 31, 2009 ranges from .45% to 1.05% of the mortgage amount and depends on the loan amount, loan-to-value (LTV) ratio and mortgage length. The ongoing FHA MIP is paid monthly by borrowers along with their mortgage payment.
There is no prepayment penalty on FHA loans.
As outlined below, the FHA Streamline Refinance Program has fewer borrower qualification requirements as compared to a standard mortgage refinance.
Borrower Credit Score
Applicants are not required to submit a credit report or score making the program ideal for borrowers who have experienced a drop in their credit score. Borrowers with lower credit scores may find it challenging to qualify for a mortgage or pay a higher mortgage rate but this does not apply to the FHA Streamline Refinance Program. Please note that although the FHA Streamline Refinance Program does not require borrowers to provide their credit score some lenders may order your credit report to satisfy their internal underwriting guidelines.
Borrower Debt-to-Income Ratio
The FHA Streamline Refinance Program does not apply a maximum borrower debt-to-income ratio which helps borrowers who have experienced a decrease in their monthly income or increase in monthly debt expense. Not applying a debt-to-income ratio means more borrowers can refinance their FHA loans. Please note that although the FHA Streamline Refinance Program does not require a credit report or apply a maximum borrower debt-to-income ratio, most lenders confirm that borrowers have the financial ability to repay their new FHA mortgage. This is typically accomplished by verifying the borrower’s on-time payment history and applying guidelines similar to the Qualified Mortgage (QM) criteria to ensure that borrowers can afford and repay their loan.
Borrower Income Limit
Unlike some other mortgage assistance programs, the FHA Streamline Refinance Program does not apply borrower income limits.