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What is an FHA Streamline Refinance Loan?

The Federal Housing Administration (FHA) started insuring Streamline Refinance Loans over 25 years ago. The term "streamline" refers to the amount of documentation and underwriting required for processing this type of transaction.

    The basic guidelines for an FHA Streamline Refinance include:
  • The existing loan must already be an FHA loan.
  • A new appraisal is not required, unless you want to exceed your original loan amount.
  • The existing loan is current (not delinquent), with no more than two payments over 30+ days late in the last 12 months.
  • The borrower has a minimum credit score of 620.
  • In the case of two borrower’s, only one needs to be actively employed. (Income is not verified on a Streamline Refinance.)
  • The home being refinanced is your primary residence.
  • Additional cash is not taken out. (FHA does have another option for cash-out refinances.)

Within these guidelines, one of the following four options may fit your specific needs:

Option 1: Stay within your current budget.
Your loan is structured so that the amount paid at close is approximately the same as your normal house payment. Since you are able to skip sending one payment to your current lender, this amount is something you are accustomed to paying from your budget. You can also plan on receiving a refund of any escrow account balance from your existing lender once they have received the payoff. This can feel like you are getting a cash-out option, depending on the current balance in your escrow account.

Option 2: Use your equity.
If you have had your current home loan for some time, there may be enough equity available to set your new loan amount to cover closing costs and pre-paids so that you bring no money to close. You can still plan on receiving a refund of any existing escrow account balances from your current lender once the current loan is paid off.

Option 3: Let your lender help.
If there is not enough equity to include your costs into the loan, and cash is currently tight, the lender may be able to help. By choosing a slightly higher interest rate, the money from that premium can be used toward your closing costs. As with the other options, any existing escrow account balances from your current lender would be yours to keep once the existing home loan is paid off.

Option 4: Use your home’s value.
While using all other requirements for a Streamline Refinance, with this approach a new appraisal is ordered on your current home. Assuming a home value that supports a higher loan amount, we can set your new loan to cover closing costs and pre-paids so that you bring no money to close. Yet again, that remaining balance in your current escrow account is yours to use as you wish when the existing loan is paid off.

    This program has become very popular because:
  • the program has great ease and speed of completion
  • it does not require an appraisal
  • income is not verified, only employment
  • there are relatively little out-of-pocket costs.

If you have questions about this or other refinancing options, please contact one our Home Loan Specialists.