FHA Streamline Refinance
Note: Looking for information about the regular FHA Mortgage Program or FHA Streamline 203k (renovation). See the respective links. This page is about FHA Streamline which only refinances existing FHA mortgages.
The FHA Streamline Refinance is an excellent program for people who already have an FHA Mortgage. This is a refinance program only, not a program to purchase a home. However, for people considering a purchase with an FHA Mortgage, it's also good to know about this program as a potential benefit in case of future interest rate decreases.
The FHA Streamline Refinance makes it easier to refinance by reducing some of the requirements for the loan. It eliminates the need for a new appraisal at the time of the refinance. This reduces cost and works even if property values decrease.
How does FHA Streamline work?
The basic idea of an FHA Streamline is it allows you to refinance your existing balance without a new appraisal. Additional requirements are reduced with the "no credit" version of Streamline (also known a non-credit qualifying Streamline).
There are two versions of the program --
Credit Qualifying (CQ) FHA Streamline
Credit qualifying FHA Streamlines follow traditional FHA underwriting guidelines (under its manual underwriting procedures). They require traditional documents from the borrower to qualify for the loan. The only exception is the appraisal. No appraisal is required.
The benefits of a Credit Qualifying Streamline relate to having no appraisal --
Immediate cost savings. You are not paying for an appraisal (typically $400 - $450).
Avoid any obstacles or complications that could come from an appraisal.
Ignores any property condition issues that may be identified by an appraiser
Ignores property value issues. Even if your value declined for some reason, you can refinance if you meet the requirements of this program.
However, one thing you CAN do on a CQ refinance that you generally CANNOT do on a Non-Credit Qualifying refinance is you can remove a borrower (or borrowers) as long as one of the original borrowers stay on the loan. If multiple people originally purchased the home together, one or more can be removed.
This is also helpful in situations where a non-occupant originally co-signed on the original loan so that you could qualify. If they want to be removed, and if you meet the requirements for a Streamline, you can remove them as part of the Streamline refinance process.
Non-Credit Qualifying (NCQ) FHA Streamline
FHA Non-credit qualifying streamlines provide the advantages of CQ, plus additional advantages.
With non-credit qualifying, we examine your credit score itself, payment record on the mortgage, and public records (such as judgments) but NOT other credit accounts. We don't look at late payments on accounts OTHER than the mortgage. We don't look at collections.
We use a special, limited credit report that shows your credit score and mortgage payment history without the other accounts. So, this is not a full credit report.
Additionally, non-credit qualifying requires verification that you are employed or still in business (if you're self employed), but we do not examine your income. So, we do not examine debt-to-income ratio.
Furthermore, we do not examine your assets in general. The exception to this is that we do require bank statements only insofar as we need to document any cash you're bringing to closing. Generally, we do not examine large deposits.
Non-credit qualifying advantages include --
All the benefits of Credit Qualifying, PLUS....
Much less documentation
No documentation regarding debt-to-income ratio
Reduced documentation and requirements regarding assets (see above)
No examination of payment history on non-mortgage accounts
Disadvantages and Limitations - What You Can NOT Do with FHA Streamline
Unfortunately, loan amounts on FHA Refinances are very restricted in respect to only refinancing the balance of the existing loan, with some minor adjustments. In other words, you cannot increase the loan amount to cover closing costs or prepaid items (deposit of taxes and insurance into escrow, ect.)
As a result, the borrower must bring cash to close -- usually several thousand dollars -- to closing in just about every Streamline refinance.
Note: Much of the cash outlay is subsequently replenished by (a), the refund you receive after closing from your existing escrow account, and (b) typically not having a payment in the month immediately following your closing. But this doesn't help people who have no money and no access to funds in the first place.
You must receive a 5% reduction in your payment. You cannot use FHA Streamline without this (except in case of refinance an ARM to a fixed rate)
It's almost impossible to reduce your loan term through a Streamline refinance. That's because of the above-mentioned 5% payment reduction requirement. For example, if you're changing from a 30-year term to a 15-year term, you will usually NOT reduce your payment by 5% unless the loan is significantly paid down, in which case FHA Streamline is generally pointless anyway.
You cannot remove a borrower's name on the "no credit" (NCQ) refinance program -- except under certain circumstances such as death or a court order such as divorce order.
You cannot do the Streamline refinance UNTIL 210 days have passed since the closing date of the mortgage that is being refinanced.
You cannot do the Streamline refinance UNTIL you've made at least six payments on the mortgage being refinanced.
You cannot refinance with open judgments or delinquent Federal debt. An exception to paying in full is if the judgment is set up on a payment plan. The payment must be taken against the borrower and the borrower must make at least 3 scheduled monthly payments.
Thanks for the info! What Are My Next Steps?
The first step for us to get to know you is fill out the information in the Get Started Online page. We'll get in touch promptly, get to know you more personally with an informal phone call, and help you explore your options from there.