FHA Streamline Refinance
An FHA streamline refinance is available to homeowners that have an FHA (Federal Housing Administration) loan. It is intended to give homeowners an easier way to obtain mortgage refinancing from a participating lender. In order to qualify, a homeowner must currently have an FHA-insured mortgage and cannot be delinquent on the payments.
- To qualify for an FHA streamline refinance, the borrower must show there will be a net tangible benefit in doing so. This is not difficult.
- The program offers an easy way to refinance the loan, including not requiring an appraisal.
- The borrower cannot be delinquent on their current mortgage and no more than $500 can be taken out of the refinance loan.
The objective is to reduce the homeowner’s monthly interest and principal payments.
FHA does not require an appraisal on a streamline refinance. It uses the homeowner's initial purchase price instead. FHA does not require a credit report, although the lender that is actually lending the money may require a credit report.
There are two types of FHA refinance loans available: Non-credit qualifying and credit qualifying. There are some differences in the requirements for each type. Non-credit qualifying borrowers do not have to submit a new application with job and credit verifications. Non-credit qualifying streamline refinances are available to homeowners who have owned the property for at least six months. A credit qualifying streamline refinance is required when the new mortgage will result in a monthly payment increase of 20% or more.
The most Important requirement for an FHA streamline refinance is demonstrating a net tangible benefit. This means that the homeowner must show that refinancing will be to their quantifiable financial benefit. This net tangible benefit can be achieved by reducing the mortgage term, the interest rate, or both.