Streamline Your FHA Loan Refinance

With the trend of falling interest rates since 2019, the number of mortgage refinances around the country has spiked and continues to rise. Borrowers with FHA loans can also capitalize on the low rates, but it may be possible to simplify the process with the FHA Streamline Refinance.

How it Works

With an FHA Streamline Refinance, current FHA mortgage holders can refinance their loan without getting a second home appraisal. While most refinances require this step, the FHA allows its borrowers to skip it since the appraisal was already completed with the first mortgage. This means that a Streamline Refinance costs less and closes faster.

There is also a “non-credit qualifying refinance” where mortgage holders don’t need to requalify with an income and credit check. This is especially beneficial for FHA borrowers who have changed or lost jobs with during uncertain times.

Requirements for the FHA Streamline Refi 

FHA borrowers considering a Streamline Refinance should know that there are certain requirements to qualify.

They must be current with their monthly payments. While the FHA makes some consideration for late payments, mortgage holders will need to have a history of timely mortgage payments to be eligible for the Streamline Refi. Also take note that while the FHA might make some exceptions for late payments, your lender may have their own overlays in place, and might not consider you for the refinance based on your payment history.

Eligible borrowers also need to have a well-established history of payments, similar to a credit history. They must have made at least six-monthly payments and have had their existing FHA mortgage for a minimum of 210 days to be considered for the FHA Streamline Refinance option. The FHA usually makes exceptions for this when it comes to life changes, such as divorce or inheritance.

Finally, there must be a net tangible benefit. The FHA Streamline Refinance is only approved if it makes financial sense and if there is a benefit to the borrower. This could mean a lower interest rate, a shorter loan term, or both.

What You Should Know

There are a few things to keep in mind if you are an FHA borrower considering the Streamline Refinance.

There are still closing costs that you will need to pay. The FHA does not allow financing any closing costs in the price of the loan, except the Upfront Mortgage Insurance Premium. If you are considering using gift funds or other sources, make sure you talk to your lender to get approval. 

FHA guidelines limit no more than $500 cash-out with a Streamline Refinance to accommodate changes that might be made at closing. So, if you are thinking about a cash-out refinance, the FHA Streamline Refi is not the best option for you.

If you are still interested in refinancing, talk to your loan officer to see if you can use the FHA Streamline Refinance to take advantage of the falling interest rates to lower your monthly payments or shorten your mortgage term.

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