The Top 5 Reasons The FHA Streamline Refinance is Fantastic

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If interest rates have fallen and you have an FHA loan, you may want to take advantage of an FHA streamline refinance. The FHA streamline is a fantastic mortgage refinance program that enables you to quickly and easily reduce your interest rate and monthly payment with very little paperwork and qualifying requirements. 

Top 5 Reasons The FHA Streamline Refinance Is Great

The FHA streamline is an FHA-insured refinance transaction designed to help homeowners with an FHA mortgage quickly and easily reduce their interest rates and monthly payments.

If you have an FHA loan, you may remember that FHA mortgages are funded by private lenders, but insured and regulated by the Federal Housing Administration (FHA).

FHA financing is attractive because it offers competitive interest rates, low minimum down payments, and lending requirements that are less stringent than other types of mortgage financing. 

The FHA streamline refinance is a “rate/term” transaction, which means you’re refinancing only your existing balance without tapping into additional home equity.

FHA doesn’t allow any cash out when you do a streamline. If you’re interested in getting cash out, you may want to check out an FHA cash out refinance, HELOC, or home equity loan.

The FHA streamline refinance is a fantastic perk for homeowners who already have an FHA loan. Here are the top five reasons you may want to consider an FHA streamline loan:

  1. No credit report required – It doesn’t matter if your credit score has fallen since you closed on your existing FHA loan. Most lenders do not require a credit report.
  2. No appraisal required – You can still do an FHA streamline even if home values have fallen and you owe more than your home is worth.
  3. No income documentation – It doesn’t matter if you make a lot, a little, or nothing at all. Even if you don’t have a job, you can qualify for an FHA streamline.
  4. Minimal closing costs – Lenders tend to pay most or all of the closing costs because of a quirk unique to the FHA streamline (which I’ll cover shortly).
  5. Occupancy typically doesn’t matter – You can still qualify even if you’ve turned your home into a rental or vacation home.

The loan process tends to be fairly quick; in my experience, most FHA streamline refinance loans take around 30 days to complete. However, the process may take longer if you’re subordinating a second mortgage, home equity loan, or HELOC.

Is an FHA streamline refi the same as an FHA simple refinance? Actually, no. An FHA simple refinance is a full documentation rate/term refinance. Both FHA loan options don’t allow for cash out, but the FHA simple refinance requires a credit report, appraisal, and income documentation.

Current FHA Refinance Rates

Check out the table below for the latest FHA mortgage rates in your state. If you find something you like, I suggest submitting an application and rate locking as quickly as possible. Interest rates are volatile and can change at any time.

Want to see more options? Check all mortgage rates here

FHA Streamline Refinance Requirements

The FHA streamline refinance loan is super easy to qualify for and typically requires minimal documentation. It comes in two variations: the credit qualifying FHA streamline and the non credit qualifying FHA streamline.

In my experience, the non credit qualifying FHA streamline tends to be the most common. Here’s how it works:

  • Minimal documentation – No credit report, appraisal, or income/employment documentation required. You can be completely out of work and making zero income and still qualify for an FHA streamline.
  • No minimum credit score – There is no minimum credit score. Lenders will not even ask to run a credit report. 
  • Mortgage late payments – The FHA loan being refinanced must be in good standing, with no more than one 30-day late payment in the past 12 months and no late payments in the past three months.
  • Seasoning – You must have made at least six payments on your existing FHA loan. FHA also requires at least six months of seasoning since the first payment due date on the existing loan and at least 210 days seasoning since the closing date of the existing loan.
  • Net tangible benefit – The refinance must reduce your interest rate by at least 0.50%, unless you’re refinancing from an adjustable-rate mortgage to a fixed-rate mortgage.
  • Occupancy – Second homes, investment properties, and owner-occupied homes are eligible.
  • Allowed primary mortgage payoff – Only FHA mortgages can be paid off with a streamline refinance.
  • Other allowed payoffs – No other loans can be paid off as part of a streamline refinance. If you have a second mortgage, you may be able to subordinate it (see the next bullet point).
  • Subordination – If you have a secondary mortgage, HELOC, or home equity loan, you can subordinate it as part of the streamline refinance. Again, FHA requirements do not allow you to pay off a secondary lien as part of an FHA streamline refinance. If you’d like to roll a secondary lien into your primary mortgage, you may want to check into the FHA cash out refinance.

Again, in my experience, most lenders offer the non credit qualifying FHA streamline. If you’re working with a lender who wants to run a credit report, you can always shop around and find another lender who doesn’t.

Some lenders may also require that you live in the property. If you no longer live in the home, you can always check with another lender that doesn’t care about occupancy.

Limitations of the FHA Streamline Refinance

The FHA streamline refinance is a great program because it enables you to reduce your interest rate quickly and easily. Having said that, it does come with some limitations:

  • No cash-out – An FHA streamline is strictly a rate & term refinance, which means you cannot cash out any home equity at closing. If you want to cash out home equity, you’ll want to check into an FHA cash out refinance (also called a FACOP loan). The minimum credit score for an FHA cash out refinance is 500, but most lenders require at least a 620, in my experience.
  • Closing costs cannot be rolled into the new loan – This is a quirk unique to FHA streamlines. Because FHA strictly caps the new loan amount, you can’t roll the closing costs or escrow deposits into the new loan (which is how it works for all other refinance transactions). You’ll need to either pay for these out of pocket or negotiate a slightly higher rate to cover these costs. In my experience, most lenders will charge a slightly higher rate and use a lender credit to cover as much of the closing costs and escrow deposits as possible. When I did FHA streamlines, I tried to structure the loan so the cash to close equals about one mortgage payment. This worked well for most of my clients because you typically have a month without a mortgage payment between loans when you refinance. 
  • Net tangible benefit limitations – FHA requires that your interest rate drop by at least 0.50% if you’re not refinancing an adjustable-rate mortgage into a fixed-rate mortgage. I’ve run into situations where refinancing is clearly beneficial, but it wasn’t possible to achieve a 0.50% rate reduction because of the interest rate environment.
If you have excellent credit and a lot of equity in your home, you may want to check into a conventional refinance as well. Conventional refinance rates are usually slightly higher than FHA refinance loan rates, but you’ll be able to drop the annual mortgage insurance premium (which is relatively expensive) if your new loan amount is less than 80% of the value of your home. A good home loan expert can run a variety of options to help you get the most benefit from your mortgage refinance.

Comparing And Contrasting FHA Rate/Term Options

There are three main rate/term transactions available via FHA financing: FHA no cash out refinance, FHA simple refinance, and the FHA streamline refinance.

The FHA streamline refinance comes in two variations: the non credit qualifying FHA streamline and the credit qualifying FHA streamline.

If you’re not a mortgage professional, the key differences between these options can be confusing and difficult to remember. That’s why I’ve summarized them in the following table for you.

 FHA No Cash Out RefinanceFHA Simple RefinanceNon Credit Qualifying FHA StreamlineCredit Qualifying FHA Streamline
Documentation typeFull DocFull DocNo DocLite Doc
Minimum credit score500 *500 *None500 *
Credit report underwriting required?YesYesNoYes
OccupancyOwner-occupied, second homesOwner-occupied, second homesOwner-occupied, second homes, rentalsOwner-occupied, second homes, rentals
Max LTV97.75%97.75%NoneNone
Proof of income required?YesYesNoNo
Max debt ratios31% / 43%31% / 43%NoneNone
Appraisal required?YesYesNoNo
Allowed primary mortgage payoffAnyFHA onlyFHA onlyFHA only
Other allowed payoffsPACE loans, junior liens, equity splits, land contracts, and short payoffs.PACE loansNoneNone
Max cash out$500$500$0$0
Roll closing costs into new loan?YesYesNoNo
Learn MoreLearn MoreLearn More
* Though FHA only requires a minimum 500 credit score, most lenders will require at least a 580 to 620.

Upfront Mortgage Insurance (UFMIP) Refund

You may be entitled to an upfront mortgage insurance refund if your existing FHA mortgage is no more than 36 months old. This applies to any FHA refinance loan type, whether it’s an FHA streamline refinance, simple refinance, or cash out refinance. 

You may remember that there are two types of mortgage insurance that apply to any FHA mortgage:

  • Upfront mortgage insurance (UFMIP) – Upfront mortgage insurance currently equals 1.75% of the loan amount.
  • Annual mortgage insurance – Annual mortgage insurance (MIP) is paid as part of your monthly mortgage payment. The annual mortgage insurance rate varies depending on how much you originally put down when you purchased the home. Your lender can estimate the new MIP amount for you.

There are no refunds for the annual mortgage insurance. However, you may receive a large refund for the UFMIP, based on the following table:  

Months After ClosingUFMIP Refund %Months After ClosingUFMIP Refund %Months After ClosingUFMIP Refund %
180%1356%2532%
278%1454%2630%
376%1552%2728%
474%1650%2826%
572%1748%2924%
670%1846%3022%
768%1944%3120%
866%2042%3218%
964%2140%3316%
1062%2238%3414%
1160%2336%3512%
1258%2434%3610%

Important: UFMIP refunds are not paid directly to you. They’re applied to the upfront mortgage insurance premium on your new FHA loan. For example, if the new mortgage insurance premium is $5,000, but you’re entitled to a $4,000 refund, the net UFMIP on the new FHA loan will be $1,000.

FHA streamline refinances tend to only be workable in a falling rate environment. Remember, a streamline needs to reduce your interest rate by at least 0.50% for it to meet FHA’s net tangible benefit guidelines (unless you’re refinancing an adjustable rate into a fixed rate).

FHA Streamline Refinance FAQ

What is an FHA streamline refinance?

The FHA streamline is a unique mortgage refinance program enables you to quickly and easily reduce your interest rate and monthly payment with very little paperwork and qualifying requirements. 

What are the cons of the FHA streamline refinance?

The downside of refinancing with an FHA streamline is the cash to close. FHA strictly limits the new loan amount, which means closing costs and escrow deposits typically cannot be rolled into the new loan. Most borrowers can’t afford to pay the closing costs out of pocket, so lenders charge a slightly higher refinance rate and cover the costs with yield spread premium. When I did an FHA streamline, I tried to price the loan so my borrower only had to bring around a mortgage payment’s worth of cash to closing to set up the escrow account on their new loan. This worked well because you typically have a month without a mortgage payment between loans.

Do I have to pay closing costs on a FHA streamline refinance?

Typically, no, but it depends on the rate environment and the lender you’re working with. The FHA streamline refinance program strictly limits the new loan amount, which means closing costs and escrow deposits typically cannot be rolled into the new loan. The typical borrower can’t afford to pay the closing costs out of pocket, so lenders charge a slightly higher refinance rate and cover the costs with yield spread premium. When I did an FHA streamline, I tried to price the loan so my borrower only had to bring around a mortgage payment’s worth of cash to closing to set up the escrow account on their new loan. This worked well because you typically have a month without a mortgage payment between loans.

How long do you have to wait to do a FHA streamline?

The FHA streamline refinance program requires that you have made at least six payments on your existing FHA loan. FHA also requires at least six months of seasoning since the first payment due date on your existing FHA loan and at least 210 days seasoning since the closing date of your existing loan.

Is refinancing with an FHA streamline similar to refinancing with a VA streamline?

Yes, refinancing with a VA or FHA streamline is a very similar process. Both typically don’t require a credit report, appraisal, or income documentation. Refinancing with a VA streamline is even easier than refinancing with an FHA streamline because the closing costs (which are strictly capped by VA regulations) can be rolled into the new loan.

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About Mike Roberts

Mike Roberts is the founder of MyHECM.com, a published author, and a highly experienced mortgage industry veteran with over a decade of mortgage banking experience. When he's not working, he enjoys spending time with his family, skiing, camping, traveling, or reading a good book. Roberts is the author of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage, which is available on Amazon.