Fha streamline refinance guidelines


The Federal Housing Administration (aka FHA) offers a refinance loan program for homeowners with a current FHA loan. The term “streamline” refers to the amount of paperwork required to process the new FHA home loan.

Here are some of the guidelines for the FHA streamline program:
  • The current mortgage loan to be refinanced must already be an FHA loan
  • The FHA mortgage to be refinanced should be current (not delinquent).
  • The new streamline FHA home loan must lower the monthly principal and interest payment
    No cash out is permitted. In other words, you cannot finance more than the current FHA loan.

Unfortunately, you may have some closing and tax escrow costs with the loan refinance. The Federal Housing Administration prohibits rolling any new closing costs into the new loan, however; some mortgage companies may offer "no cost" refinances by charging a higher rate of interest on the new loan.

Do you need an appraisal for FHA streamline?

Unlike many loan refinance loans, the FHA streamline program does not require a home appraisal! This is a great way to refinance your mortgage loan if your home value is less than the mortgage balance.

Does FHA streamline refinance require income verification?

Since you already qualified for your current FHA home loan, the FHA streamline program does not require additional verification of income or employment; however, some mortgage companies may require one or the other or both verifications.

If income or employment verification is a concern, seek out a mortgage company who does not require these verifications.



Frequently Asked Questions About FHA Streamline Refinance

► Are there closing costs for FHA streamline refinance

Unfortunately, you may have some closing and tax escrow costs with the loan refinance. The Federal Housing Administration prohibits rolling any new closing costs into the new loan, however; some mortgage companies may offer "no cost" refinances by charging a higher rate of interest on the new loan.

► Can you cash out on a FHA streamline?

No. The FHA streamline program is intended for interest rate reduction.

► Can you roll in closing costs on a FHA streamline?

No. Closing and escrow costs cannot be "rolled in".

► Can you take cash out on an FHA streamline?

No.

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

Yes.

► Do I need an appraisal for an FHA streamline?

No. Appraisals are not required for the FHA streamline program

► What is the minimum credit score for an FHA streamline refinance?

The FHA streamline program does not require a credit check and there is no minimum credit score requirement.

Additional FHA streamline requirements:

The new FHA loan amount cannot be higher than your original loan amount, and the refinance must lower your monthly principal and interest payments by at least 5% or get you out of an adjustable-rate mortgage and into a fixed-rate home loan.

Per the HUD – FHA web site:
At loan application:
1 - The borrower must be current on their FHA mortgage
2 - The borrower is required to have made at least 6 full months of mortgage payments since the first payment date
3 - At a minimum,  210 days is required to have passed from the date of closing of the mortgage being refinanced
 The borrower must exhibit an acceptable payment history as listed below: For FHA home loans with less than a 12 month payment history, all monthly mortgage payments must have been made in the month due.

For FHA mortgages with a 12 month payment history or greater, the borrower must have:
Experienced no more than one 30 day late payment in the preceding 12 months, AND
Made all mortgage payments within the month due for the three months prior to the date of loan application.

The mortgage company is required to determine that there is a net tangible benefit as a result of the streamline refinance . . . with or without an appraisal. Net Tangible benefit is defined as:

1 - The reduction to the principal balance, interest plus mortgage insurance premium by at least 5% (compare the new principal and interest payment & monthly mortgage insurance premium to the existing monthly principal and interest payment & mortgage insurance payment), or

2 - For details of permissible minimum thresholds involving refinancing in or out of an adjustable rate mortgage -refer to ML 2011-11.

3 - Investment or secondary properties: for FHA financed properties that have become second homes or investment properties, a streamline refinance is only permitted without an appraisal. All other underwriting requirements must be met, and these properties may not be refinanced into an adjustable rate mortgage.

Assets: If assets are required at closing (settlement), assets must be verified.

The most recent payoff statement must be in the case binder.

Subordinate financing (2nd mortgages): if subordinate financing will remain in place, the maximum CLTV is 125%. To calculate the maximum CLTV for streamlines refinances without an appraisal, use the "original property value" shown on the Refinance Authorization screen in FHAC. For streamline refinances with an appraisal, the CLTV calculation is based on the new appraised value.

LDP and GSA lists are required to be checked, however there is no need to check the CAIVRS.

URLA: for non-credit qualifying streamline refinances, an abbreviated version of the URLA is permitted, however for credit qualifying streamlines, a fully completed URLA is required.

Maximum mortgage:
Streamline refinance without an appraisal (owner occupied): the maximum mortgage loan is the outstanding principal balance plus interest charged by the servicing lender (but may not include delinquent interest, late charges or escrow shortages), less UFMIP refund plus new UFMIP.

Streamline refinance with an appraisal: as reflected above for case number assigned on or after April 18, 2011. For cases with case numbers assigned prior to this date refer to Handbook 4155.1, section 6.C.

Streamline refinance without an appraisal (non-owner occupied): these loans may only be refinanced without an appraisal and the new base mortgage can only cover the outstanding principal balance minus any UFMIP refund. Further, the loan term of the mortgage must be the lesser of 30 years or the remaining term of the mortgage plus 12 years.