If you have a mortgage that’s insured by the Federal Housing Administration (FHA) and you want to refinance to take advantage of low interest rates, you may be in luck. The FHA has a special program that can help you refinance your FHA loan through a streamline process that’s easier than the typical refinancing.
Here’s a summary of what an FHA streamline refinance is, what the advantages of an FHA streamline refinance are, how an FHA streamline refinance works and what the requirements are.
FHA Refinance Loan Streamline Process
It’s important to remember that “streamline” doesn’t mean you can refinance your FHA loan without any closing costs. Instead, “streamline” refers only to the process, which involves less documentation and other requirements than a typical mortgage refinance does. For example, an FHA streamline refinance loan might not require an appraisal. That’s a major advantage if you want to refinance but believe your home has declined in value.
Though the streamline refinance isn’t cost-free, your lender may allow you to finance the closing costs through a slightly higher interest rate on your new loan. That means you won’t have to pay a lot of cash out-of-pocket to streamline refinance your existing FHA-insured mortgage. Instead, you’ll pay a higher interest rate and your FHA lender will pick up the tab for the closing costs of your streamline refinance. If you refinance into an FHA loan with a lower interest rate, you’ll still save money on your monthly mortgage payment.
Qualifying for an FHA Streamline Refinance Loan
The basic requirements for an FHA streamline refinance are:
• The mortgage that you want to refinance must be an FHA-insured loan.
• You must be current (i.e., not delinquent) on your mortgage payments.
• The primary reason why you want to refinance your FHA loan must be to lower your monthly principal and interest payment.
• You cannot tap your equity (i.e., take out cash) if you use the streamline process.
The FHA streamline refinance loan program isn’t new; in fact, the streamline process has existed since the early 1980s. An FHA-approved lender can help you get started on your FHA streamline refinance loan.