6 min read May 23, 2024

FHA Streamline Refinance: Save Your Monthly Payments 

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Jason Joshi

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FHA streamline refinance is for present homeowners who have an FHA-insured mortgage. It is a program that allows FHA-approved lenders to refinance current insured loans.

Also, streamlined refinance helps with a lower interest rate on different types of loans, which can be fixed or adjustable mortgages. Moreover, the maximum LTV of a refinanced FHA loan with no cash out is 97.75% or 98.75%, whichever is needed for the appraised value.

Even if you have a conventional loan, you can refinance with an FHA loan to streamline refinance with the required criteria. 

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💸 Benefits of FHA Loan Refinancing

  • One of the major advantages of FHA streamline refinance is that there is no home appraisal requirement.
  • There is no requirement for mortgage credit underwriting for refinance FHA.
  • FHA refinance loans will not charge any pre-payment fees if you pay off early.

What Is an FHA Streamline Refinance?

If you already have an FHA loan, a streamlined refinance can be valuable to lower your monthly mortgage payment. Therefore, it’s a simpler process to refinance your existing FHA mortgage into a new one with potentially lower interest rates.

Types of FHA Streamline Refinance Loans 

Two types of FHA refinancing options can help homeowners reduce their monthly payments. Both options refinance only primary properties, as with FHA loans you can’t finance investment properties. 

Credit Qualifying Streamline Refinance 

This streamline mortgage is a good fit for you if your credit scores have increased since you opted for an FHA loan. In this FHA loan refinance, the lender will assess your current financial situation to make sure you can handle the new loan. 

Besides this, you also need to provide some documentation to the lender, including a credit check and income verification. 

Non-Credit Qualifying Streamline Refinance 

This option in FHA streamline refinance is well known for its speed and simplicity. It is a good option if your credit score is good and you prioritize a quick and hassle-free refinance process. Since the lender may not ask for your financial information, the interest rate on this streamlined refinance decision may vary. 

How the FHA Streamline Works?

It’s an easy process and a way to get lower mortgage payments and save money. 

  • Contact a Lender: You must contact a mortgage lender specializing in FHA loans. They will help explain the process and determine if you qualify for a streamline loan. 
  • Choose Your Streamline Refinance Option: You need to choose any streamline refinance option. The credit-qualifying option might offer a lower rate but you need to provide some documents for verification. In the noncredit qualifying option, you may face a higher rate.
  • Gather Documents: If you choose the credit qualifying option for FHA streamline refinance. You need to provide some documents like pay stubs, bank statements, credit reports, etc. Whereas, in non-qualifying credit, you need less paperwork and just the basic information. 
  • Closing: Once approved and permitted for FHA streamline refinance, you will also need to finalize the details and sign the documents at closing.

Documents Needed for FHA Streamline Refinance 

The documents needed to streamline an FHA loan depend on the type you choose, like credit qualifying or non-credit qualifying. 

Documents for Credit Qualifying Streamline Refinance 

  • If you have any current mortgage statements, your lender may ask for information to cross-check your payment history and loan details. 
  • You need to provide the FHA case number, which will help the lender identify your original FHA loan. 
  • You need to submit proof of income documents like pay stubs, W-2s, and tax returns for the past 2 years to verify employment. 
  • A lender may ask you for bank statements or investment account statements for verification of assets. 

Documents for Non-Credit Qualifying Streamline Refinance 

The documents required for non-credit qualifying streamline refinance vary by lender:

  • You need to provide basic property information, which includes address, property type, and estimated value. 
  • FHA case number to verify your original FHA loan. 
  • Proof of homeowner’s insurance to check your current insurance. 

Benefits of Refinance FHA Mortgage 

There are various benefits you can avail of with refinancing FHA loans:

  • Save Monthly Payments: If interest rates have dropped since you got your FHA loan, refinancing will help with a new loan. It will benefit you with a lower interest rate and can save you on monthly payments. 
  • Switch to a Fixed Rate Loan: If you have an ARM with your FHA loan, refinance to a fixed-rate loan can be more affordable. It helps in locking an interest rate for the life of a loan term and can be protected by paying higher interest rates in the future. 
  • Simple Process: Opting to refinance an FHA loan usually involves less paperwork and documentation as compared to a traditional loan. In some cases, an FHA appraisal might not be required to make it a faster process. 

Disadvantages of FHA Streamline Refinance

Some of the following disadvantages of refinancing with FHA loan are:

  • Only those with a current FHA loan can qualify for a streamline refinance option.
  • Refinancing includes upfront costs like origination fees, among others, to ensure long-term savings. 
  • The faster and easier non-credit qualifying option might come with a higher interest rate. 

Should You Use the FHA Streamline?

Yes, you can use FHA streamline refinance if you already have an FHA loan. Compared to other conventional mortgages, it is a faster and simpler process. Also, it requires less paperwork, depending on the type of refinance you choose. 

However, remember that streamlined refinance might not offer the absolute lowest interest rates; you have to consider closing costs as well. 

Bottom Line 

An FHA streamline refinance is the best option if you already have an FHA loan and want lower interest rates. In addition to this, Houzeo can help connect with lenders to decide the best fit for you and make the home-buying process easier for you. 

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Frequently Asked Questions

What's a streamline refinance?

An FHA streamline refinance is the process of financing your existing FHA loan into a new loan. It includes less paperwork and a lower interest rate.

What are the FHA streamline refinance requirements?

To qualify for an FHA streamline refinance, your current FHA loan needs to be at least a year old and in good standing. This means all your payments must be on time, and the refinanced amount cannot be higher than your original FHA loan.

Who is eligible for an FHA streamline refinance?

You must have an FHA loan in place and be current on your mortgage payments to be eligible for an FHA streamline refinance.

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