FHA Streamline Refinance Loans

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FHA streamline loans emerged onto the mortgage scene in the early 1980's. Since then, thousands of FHA home owners have utilized this program to lower their interest rate with fewer costs and relative ease.


A streamline refinance loan refers to the amount of documentation and underwriting that is conducted on a loan file by the mortgage company. Less documentation is required, and therefore the process is 'streamlined.'

 

Mortgage companies may offer streamlines "no cost" (actually no out-of-pocket expenses to the borrower) by charging a higher interest rate on the new loan. Other companies may offer a streamline refinance that wrap the costs into the new mortgage amount. There must be sufficient equity in the property to roll in closing costs.

 

Streamline refinance loans with or without and appraisal, do not require credit underwriting. While HUD does not disqualify a borrower for prior late mortgage payments, individual lender may have restrictions. New individuals may be added to title on a streamline refinance without credit review. Deleting individuals from title on a streamline refinance may require qualification (certain exceptions may apply).

 

The following are basic requirements of an FHA streamline refinance:

 

  • The mortgage to be refinanced must already be FHA insured
  • The mortgage to be refinanced should be current (not delinquent)
  • The refinance must lower the principal and interest payment of the previous mortgage payment
  • The borrower may not receive cash from loan proceeds in excess of $500.
  • Any subordinate financing may remain in place as long as it is subordinated on title.
  • The term of the new mortgage must be the lesser of 30 years or the unexpired term of the mortgage plus 12 years. A borrower cannot refinance from a 15 year loan to a 30 year loan.
  • An appraisal is not required unless the closing costs are wrapped into the loan. Streamline refinances without an appraisal are limited to the unpaid principal balance, minus any refund credit of the mortgage insurance premium (MIP), plus the new upfront MIP if it is to be financed in the mortgage.
  • No termite report is required
  • The borrower cannot be late, delinquent, or in default of any federal debt.