FHA Streamline Refinance
What Is An FHA Streamline Refinance?
The FHA Streamline is a special refinance product, reserved for homeowners with existing FHA mortgages. An FHA Streamline is the fastest, simplest way for FHA-insured homeowners to refinance their mortgages into today’s low mortgage rates.
Benefits of the FHA Streamline program include:
- Low refinance rates — FHA loan rates averaged 3.94% in October, 2019 (the most recent data available). This is an incredibly low rate compared to recent history
- Lower MIP rates — If you got an FHA loan between 2010 and 2015, you may be able to lower your annual mortgage insurance premium using the FHA streamline
- MIP refund – Homeowners who use the FHA Streamline Refinance may be refunded up to 68% of their prepaid mortgage insurance, in the form of an MIP discount on the new loan
- No appraisal — You can use the FHA Streamline Refinance even if your current mortgage is underwater
- No verification of job or income — You may be eligible for the FHA Streamline even if you recently lost your job or took a pay cut
- No credit check — A low credit score won’t stop you from using the FHA streamline program. This is almost impossible to find with other refinance loans
If you currently have an FHA home loan and you want to refinance into a lower rate, the FHA Streamline should be your first stop. Its benefits are near-unmatched by any other refinance program.
FHA Streamline Refinance Rates
As of October 2019, the average FHA mortgage and refinance rate is about 3.94%. But remember, there’s an FHA mortgage insurance fee that adds 0.85% annual interest. This also applies to Streamline refinances. So if you’re considering a Murfreesboro FHA Streamline Refinance, now is a good time to capture a base rate below 4% and see bigger savings over the life of your loan.
How the FHA streamline program works
For the most part, the FHA Streamline works like any other refinance program. It’s available as a fixed rate or adjustable mortgage; it comes as a 15- or 30-year term; and there’s no FHA prepayment penalty to worry about.
The FHA Streamline cannot be used to refinance a 30-year mortgage into a 15-year mortgage. It can, however, be used to extend a 15-year loan into a 30-year. Doing so lowers monthly payments even further for homeowners.
Another big plus is that rates for the FHA Streamline Refinance are the same as mortgage rates for a “regular” FHA loan. There’s no penalty for being underwater, or for having very little equity.
FHA streamline: No appraisal
The biggest difference between the FHA Streamline and most traditional refinance programs is that it doesn’t require a home appraisal.
Instead, the FHA will allow you to use your original purchase price as your home’s current value, regardless of what your home is actually worth today.
The FHA streamline refinance does not require an appraisal, so you can refinance into a lower rate even if you owe more on your loan than the home is currently worth.
In this way, with its FHA Streamline Refinance program, the FHA does not care if you are underwater on your mortgage. Rather, the program encourages underwater mortgages.
Even if you owe twice what your home is now worth, the FHA will refinance your home without added cost or penalty.
The “appraisal waiver” has been a huge hit with U.S. homeowners, allowing unlimited loan-to-value (LTV) home loans via the FHA Streamline Refinance program.
FHA Streamline: No verification of job, income, credit
Another big plus is that the Murfreesboro FHA Streamline Refinance is fairly easy for which to qualify.
Earlier this decade, in an effort to help U.S. homeowners, the FHA abolished most of the typical verifications required to get a mortgage. So, today, as it’s written in the FHA’s official mortgage guidelines :
- Employment verification is not required with an FHA Streamline Refinance
- Income verification is not required with an FHA Streamline Refinance
- Credit score verification is not required with an FHA Streamline Refinance
There’s no need for a home appraisal, either, so when you put it all together, you can be (1) out-of-work, (2) without income, (3) carry a terrible credit rating and (4) have no home equity. Yet, you can still be approved for an FHA Streamline Refinance.
That’s not as crazy as it sounds, by the way.
To understand why the FHA Streamline Refinance is a smart program for the FHA, we have to remember that the FHA’s chief role is to insure mortgages — not “make” them.
It’s in the FHA’s best interest to help as many people as possible qualify for today’s low mortgage rates. Lower mortgage rates means lower monthly payments which, in theory, leads to fewer loan defaults.
This is good for homeowners that want lower mortgage rates and for the FHA — but mostly for the FHA.
Are you FHA Refinance eligible?
Although the FHA Streamline Refinance eschews “traditional” mortgage standards, like income and credit verification, the program does enforce minimum standards for applicants.
- 3 months of on-time mortgage payments
- At least 210 days since your last refinance
- There must be a clear benefit
- Usually you must lower your rate by at least 0.50%
The official FHA Streamline Refinance guidelines are below. Note that not all mortgage lenders will underwrite to the official guidelines of the Federal Housing Administration.
Some lenders might enforce credit score minimums or other limitations for FHA Streamline mortgages.
Perfect, 3-month payment history is required
The FHA’s main goal is to reduce its overall loan pool risk. Therefore, it’s number one qualification standard is that homeowners using the Streamline Refinance program must have a perfect payment history stretching back 3 months. 30-day, 60-day, and 90-day lates are not allowed.
One mortgage late payment is allowed in the last 12 months. Loans must be current at the time of closing.
210-day “waiting period” after buying or refinancing
The FHA requires that borrowers make 6 mortgage payments on their current FHA-insured loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance.
The refinance must have “purpose”
Streamline Refinance applicants must demonstrate that there’s a Net Tangible Benefit in the refinance; a legitimate reason for refinancing.
Loosely, Net Tangible Benefit is defined as reducing the “combined rate” by at least one-half of one percent.
For instance, the homeowner has an FHA loan opened in May 2013 with a rate of 5.00%, and an annual mortgage insurance premium equal to 1.35%. The combined rate is 6.35%.
The homeowner receives a rate quote at 4.75% with MIP of 0.85%. She saves on her rate and mortgage insurance, since FHA MIP was reduced in January 2015.
The new combined rate would be 5.60%, or three-quarters of one percent lower than the existing combined rate. The FHA refinance is eligible.
Another allowable Net Tangible Benefit is to refinance from an adjusting ARM into a fixed rate loan. Taking “cash out” to pay bills is not an allowable Net Tangible Benefit.
Employment and income are not verified
The FHA does not require verification of a borrower’s employment or annual income as part of the FHA Streamline process.
There is no Verification of Employment, nor are there paystubs, W-2s or tax returns required for approval.
You can be unemployed and get approved for a FHA Streamline Refinance so long as you still meet the other program requirements.
Credit scores are not verified
The FHA does not verify credit scores as part of the FHA Streamline Refinance program. Instead, it uses payment history as a gauge for future loan performance.
This means that FICO scores below 640, below 620, below 580, and below 500 are eligible for Streamline Refis.
Some lenders, however, create their own minimums. Check your lender’s guidelines before applying.
Other FHA Streamline Refinance guidelines
The FHA Streamline Refinance is relatively easy to qualify for. But expect to pay closing costs out of pocket. The FHA Streamline does not allow you to roll closing costs into the loan amount. In addition, you’re not allowed to do a cash-out refinance with the FHA streamline.
Loan balances may not increase to cover loan costs
The FHA prohibits increasing a Streamline Refinance’s loan balance to cover associated loan charges. The new loan balance is limited by the math formula of (Current Principal Balance + Upfront Mortgage Insurance Premium). All other costs — origination charges, title charges, escrow population — must be either (1) Paid by the borrower as cash at closing, or (2) Credited by the loan officer in full.
The latter is called a “zero-cost FHA Streamline”.
No cash out
You can’t take extra cash when refinancing with an FHA streamline loan. This refinance is mainly for the purpose of dropping your rate and payment.
However, the FHA cash out refinance is another product offered by the FHA. It allows you to open a loan of up to 80% of your home’s value. If that amount is larger than your current loan balance, you take the difference in cash.
Use these funds for any purpose: pay off debt, improve your home, or create an emergency fund.
Appraisals not required
The FHA isn’t concerned about home value — it’s insuring your loan regardless.
Therefore, the FHA does not require appraisals for its Streamline Refinance program. Instead, it uses the original purchase price of your home, or the most recent appraised value, as its valuation point.
Homes that are underwater are still FHA Streamline-eligible.
FHA Streamline Refinance mortgage insurance premium (MIP) requirements
Like other FHA loans, the FHA Streamline Refinance requires borrowers to pay mortgage insurance.
Even if you’ve built equity in the home since purchasing it, the FHA Streamline Refinance cannot be used to eliminate mortgage insurance premium (MIP).
FHA borrowers are required to make two types of mortgage insurance payments: an upfront mortgage insurance payment paid at closing, plus an annual payment split into 12 installments, paid with your mortgage payment each month.
- Upfront Mortgage Insurance Premium (UFMIP) = 1.75% of the loan amount for most recent FHA loans and refinances
- Annual Mortgage Insurance Premium (MIP) = 0.85% of the loan amount most recent FHA loans and refinances
With respect to mortgage insurance premiums, homeowners using the FHA Streamline Refinance program are split into two classes:
- Homeowners whose new loan replaces an FHA-backed mortgage endorsed prior to June 1, 2009
- Homeowners whose new loan replaces an FHA-backed mortgage endorsed on/after June 1, 2009.
Homeowners in the first class -— those with “old” FHA mortgages — are assigned different mortgage insurance than newer FHA homeowners.
Specifically, these older FHA mortgage qualify for a reduced upfront premium of just 0.10% of the loan amount, or $10 for every $100,000 borrowed.
Additionally, monthly mortgage insurance is just 0.55% of the loan amount annually, compared to “regular” MIP of 0.85% per year.
FHA Streamline MIP For Loans Endorsed On/After June 1, 2009
If you are refinancing an FHA mortgage via the FHA Streamline Refinance program and your existing FHA mortgage was endorsed on, or after, June 1, 2009, your mortgage insurance premium schedule on your new FHA loan is as follows.
Upfront Mortgage Insurance Premiums (UFMIP)
For an FHA Streamline Refinance replacing a loan endorsed on, or after, June 1, 2009, the FHA upfront mortgage insurance premium is equal to 1.75 percent of your loan size, or 175 basis points.
This is $1,750 for every $100,000 borrowed. The FHA automatically adds the $1,750 premium to your loan balance for you — it’s not paid as cash. However, not all refinancing households will pay the full amount.
For FHA-backed homeowners refinancing within the 3 years of their existing loan’s start date, the FHA provides a refund on your previously-paid upfront MIP.
The size of the refund diminishes as the 3-year window elapses.
For example, a homeowner who refinances an FHA mortgage after 11 months is granted a 60% refund on his initial FHA UFMIP. 30 days later, the refund drops to 58%. After another 30 days, it drops to 56%, and so on.
Annual Mortgage Insurance Premiums (MIP)
The annual MIP schedule for an FHA Streamline Refinance which replaces a loan from on, or after, June 1, 2009 is as follows :
- 15- & 30-year loan terms with an LTV over 90%: 0.85 percent annual MIP, payable for the life of the loan
- 15- & 30-year loan terms with an LTV under 90%: 0.85 percent annual MIP, payable for 11 years
Note that these MIP costs may be lower than what you’re paying currently.
In January 2015, the FHA lowered its mortgage insurance premiums on 30-year loans, making it less expensive to carry an FHA home.
If your current FHA MIP is higher than what’s shown above, consider starting a refinance immediately to benefit from a new, lower FHA MIP.
FHA Streamline Refinance MIP (For Loans Endorsed Before June 1, 2009)
If your existing FHA mortgage was endorsed prior to June 1, 2009, your mortgage insurance premiums have been “grandfathered”.
You can refinance via the FHA Streamline Refinance program and pay reduced rates for both for upfront MIP and your annual mortgage insurance premium.
Upfront Mortgage Insurance Premiums (UFMIP)
For an FHA Streamline Refinance that replaces a loan endorsed prior to June 1, 2009, the new FHA mortgage’s upfront mortgage insurance is equal to 0.01 percent of the loan size, or 1 basis point.
For example, if your new FHA Streamline Refinance is for $100,000 mortgage, the FHA will assess a $10 upfront mortgage insurance premium (MIP) to be paid at closing. The FHA automatically adds the $10 payment to your new loan balance.
Annual Mortgage Insurance Premiums (MIP)
Annual MIP is similarly cheap for older FHA loans. For an FHA Streamline Refinance replacing an FHA loan endorsed prior to June 1, 2009, the annual MIP is 0.55% annually, or 55 basis points.
The complete annual MIP schedule is as follows :
- 15- & 30-year loan terms with an LTV over 90%: 0.55 percent annual MIP, payable for the life of the loan
- 15- & 30-year loan terms with an LTV under 90%: 0.55 percent annual MIP, payable for 11 years
The FHA requires some homeowners to pay mortgage insurance for as long as their loan is in effect.
If your FHA Streamline Refinance replaces a loan from on, or after, June 1, 2009, the rules on your FHA MIP cancellation are as follows:
- LTV of 90% or less at the time of closing: MIP is required for 11 years
- LTV greater than 90% at the time of closing: MIP required for life of loan
The FHA MIP cancelation policy applies to 15-year loan terms and 30-year loan terms equally.
Note that refinancing homeowners are welcome to bring cash to closing in order to reduce their loan balance and change their MIP disposition. However, not everyone will have the cash to make such a move.
This is why, when exploring an FHA Streamline Refinance, you should also look other refinance programs including the conventional mortgage loan via Fannie Mae or Freddie Mac, which is available with nearly every mortgage lender.
The FHA allows its homeowners to refinance to cancel FHA MIP.
FHA Streamline Refinance FAQ
FHA Streamline is a refinance program that only current FHA homeowners can use. It’s faster and easier than most refinance programs, with no documentation required for income, credit, or home appraisal. An FHA Streamline Refinance can help homeowners lower their annual mortgage insurance premium (MIP) or even get a partial refund of their upfront MIP payment.
The FHA Streamline Refinance resets your mortgage with a lower interest rate and monthly payment. If you have a 30-year FHA mortgage, you can use the FHA Streamline to refinance into a cheaper 30-year loan. 15-year FHA borrowers can refinance into a 15- or 30-year loan. The FHA Streamline does not cancel mortgage insurance premium (MIP) for those who pay it. But annual MIP rates may go down, depending on when the loan was originated.
To qualify for an FHA Streamline Refinance, your current home loan must be insured by the FHA. If you’re not sure whether it is, ask your lender. FHA also requires three months of on-time payments, and a 210-day waiting period since the last closing date (either purchase or refinance). Finally, the FHA Streamline Refinance must have a “purpose.” That usually means the refinance needs to lower your combined interest and insurance rate by at least 0.50%.
FHA homeowners are eligible for a Streamline Refinance 210 days after their last closing. That means you must have made 6 consecutive mortgage payments since you purchased or last refinanced the home.
Yes, you can use the FHA Streamline Refinance more than once. You just need to meet FHA’s guidelines — meaning it’s been at least 210 days since your last refinance, you’ve made your last three payments on time, and you can lower your rate around 0.50%.
The FHA Streamline Refinance is probably worth it if you can lower your mortgage rate and monthly payment a significant amount. It’s an especially good deal for homeowners who purchased or refinanced from 2010-2015, because FHA has since lowered its annual mortgage insurance rates. By refinancing a pre-2015 mortgage with the FHA streamline, you may be able to drop your annual mortgage insurance rate from over 1% to just 0.85%.
What are today’s FHA Streamline rates?
FHA mortgage rates are low and homeowners typically close in less than 30 days. Remember: the faster you close, the bigger your FHA MIP refund.
Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.