What Is An FHA Streamline Refinance?
If you already have an FHA mortgage then you might qualify for a FHA Streamline Refinance. An FHA Streamline Refinance is a great way for a borrower with an existing FHA backed mortgage to reduce their interest rate, reduce their payment or possibly both.
Here are some really cool facts about an FHA Streamline Refinance:
- No Appraisal is Required – because your loan is already guaranteed by your existing FHA loan, the FHA will allow you to use your home’s original purchase price as your home’s current value.
- You can still refinance even if you are underwater – even if you owe more than your home is worth, you might still be able to get an FHA Streamline Refinance loan.
- There is no FHA prepayment penalty to worry about.
- FHA Streamline refinance rates are the same current FHA loan rates.
- Employment verification is not required with an FHA Streamline Refinance – in other words, no paystubs, no W-2s or tax returns are required for approval.
- Income verification is not required with an FHA Streamline Refinance
- Credit score verification is not required with an FHA Streamline Refinance – instead of checking your credit, your payment history is used to determine if you qualify or not. You must have no late payments in the last 90 days and only one or less late payment within the last 12 months.
The Refinance Must Have A "Purpose"
Streamline Refinance applicants must demonstrate that there's a Net Tangible Benefit in the refinance or in other words a legitimate reason for refinancing. For Example:
- Refinancing from an Adjustable Rate Mortgage to a Fixed Rate Loan.
- or Reducing your principal + interest + mortgage insurance 5 percent or more.
Your Loan Balance May Not Increase To Cover The New Loan Costs
The FHA prohibits increasing a Streamline Refinance's loan balance to cover associated loan charges. The new loan balance may increase but only by the cost of the Upfront Mortgage Insurance Premium. All other costs -- origination charges, title charges, escrow -- must either be paid by the borrower as cash at closing, or credited by the loan officer in full.