An FHA streamline refinance replaces a mortgage FHA already insures with a new FHA-insured mortgage, using limited credit documentation and underwriting. FHA does not require an appraisal on a streamline, and on its non-credit qualifying option it does not require a credit report either. It is a no-cash-out refinance: the new loan's proceeds pay off the existing FHA first lien. FHA requires the lender to find that the new loan gives you a net tangible benefit before it is written, and the lender that funds the loan can add conditions of its own. We arrange FHA streamline refinances. This page sets out who the streamline is for, which of its two options applies, how FHA's benefit test is shaped, what the new loan costs in mortgage insurance and closing costs, and how to work out whether it pays.
What a lender weighs before this program is on the table. A lender can add rules of its own, and those rules can differ from one lender to the next.
The streamline exists only for a mortgage FHA already insures. The existing loan must be seasoned before the FHA case number is assigned: a minimum number of payments made on it, a minimum time passed since its first payment due date and since its closing date, each a period HUD sets, and a loan you assumed seasoned from the assumption. A loan that was modified is counted under the modification. HOPE for Homeowners mortgages cannot use the streamline process.
FHA asks for an on-time payment history on every mortgage on the property over a look-back window HUD sets, with the payment for the month before disbursement made on time. A borrower who had a forbearance plan can still qualify once the plan is complete and a run of on-time payments has followed; while still in forbearance, only the credit qualifying option is open, and it turns on the history before the forbearance. If the mortgage is not on your credit report or not in your name, the lender documents the payments another way, from bank statements or a verification of mortgage.
The lender has to find a net tangible benefit under FHA's definition before the loan can be written, and the test compares the combined rates of the old loan and the new, note rate plus annual premium rate. Moving to an adjustable rate is held to a larger required reduction than staying with a rate that does not change, and a shorter term has to come with a financial benefit and a cap on how far the principal, interest and premium payment may rise. Passing FHA's test is not the same as the refinance paying for you: the closing costs are real, they are paid outside the loan, and if you expect to sell or refinance again soon the saving may never catch up with them. Our refinance calculator works that break-even out from your own numbers.
At least one borrower on the new loan must hold title to the home before the case number is assigned. The lender documents that you live in the home as your principal residence, from employment documentation, utility bills or an electronic verification of your address, and if it cannot, it processes the loan as non-owner occupied, where the loan amount formula is tighter and the handbook limits the kind of loan the property can be streamlined into.
FHA's rules are the floor. Whether a lender adds a minimum credit score, wants a valuation for its own purposes, or declines a non-credit qualifying file is the lender's own practice, and it differs from lender to lender. The handbook adds that the original lender is never entitled to a fee for transferring a streamline's processing documents.
The steps in order, so you can see what is coming. Nothing here is underwritten until a lender underwrites it.
The FHA loan's balance, its rate and premium, when it closed, whether you live in the home, and whether anyone on the loan would be coming off it. That is enough for your loan officer to say which option the file fits and whether FHA's benefit test is in reach.
A loan application, abbreviated on the non-credit qualifying option; evidence that you occupy the home; your payment history on every mortgage on the property; and, on the credit qualifying option, the income and asset documentation FHA's manual underwriting rules call for. The lender obtains the payoff statement and FHA's refinance authorization, and underwrites every streamline by hand, because FHA's automated findings do not count on one.
The lender builds the maximum loan amount from the existing loan: the balance, plus for an owner-occupied home the interest due, late charges, escrow shortages and premium due on it, capped at the original loan amount including any financed up-front premium, less any refund of the old up-front premium. No appraisal is ordered for FHA. Closing costs are paid outside the loan, and if the cash needed exceeds a mortgage payment the lender verifies where it comes from.
Set the closing costs against the monthly saving and the time you expect to keep the loan, and set the new FHA loan, premiums included, against a conventional refinance if your equity would support one. Our refinance calculator works the break-even out from your own numbers.
Tell us what you are planning and where the property is. A loan officer here reads it with this program in mind and can go over whether it fits your file, and what else might.
Call or write to us and a loan officer here reads what you send. If you are ready, the application is open.
If yours is not here, call us. The useful answer depends on your file.
An FHA streamline refinance replaces a mortgage FHA already insures with a new FHA-insured mortgage using limited credit documentation and underwriting. It is a no-cash-out refinance, FHA does not require an appraisal on it, and FHA requires the lender to find that the new loan gives the borrower a net tangible benefit.
No. FHA does not require an appraisal on a streamline refinance, whether or not the borrower credit qualifies, and an appraisal the lender happens to have does not change eligibility or the maximum loan amount. The new loan amount is built from the existing loan's balance, and FHA uses the property's original value to set the mortgage insurance premium. A lender may still want a valuation for its own purposes.
That depends on which option applies. FHA does not require a credit report on a non-credit qualifying streamline, which is available when everyone on the existing loan stays on the new one, with an exception for divorce, legal separation or death. On a credit qualifying streamline the lender obtains a credit report and performs a credit and capacity analysis under FHA's manual underwriting rules. A lender may set conditions of its own on either option.
Not into the loan amount. FHA builds a streamline's maximum loan amount from the existing loan's balance and certain amounts due on it, and closing costs, prepaid items and discount points are not part of that formula. They are paid outside the loan, or FHA's handbook allows new subordinate financing whose proceeds pay them. Set those costs against the monthly saving before deciding the refinance pays.
Yes. The new loan carries FHA's up-front mortgage insurance premium and its annual premium, at the amounts FHA publishes. If the refinance falls inside FHA's refund window, a credit for part of the up-front premium paid on the old loan reduces the up-front premium on the new one, and the credit shrinks month by month on FHA's schedule. A borrower who now has the equity for a conventional loan may want to compare leaving FHA altogether.
Government-insured
Government-insured, with credit score tiers HUD publishes.
Refinance
Lowers the rate on a VA loan you already have, secured by the same home. VA's rule requires no appraisal or credit underwriting unless the loan is delinquent; a benefit test, a recoupment rule and the funding fee apply.
Refinance
Replaces your mortgage with a larger one and pays you the difference at closing. The new loan's rate, term and costs replace the ones you had, and the home secures it.
Where this program fits:Buying a homeRefinancingThe county's loan limitsThe Central CoastServices
The county seats:San Luis ObispoSanta Barbara
Run the numbers:Refinance break-even calculator
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This page is general information about a loan program, not an offer of credit or a commitment to lend. What a lender will do with your file depends on the file.
Answer a few questions and your loan officer can talk you through which programs could fit your file, including when this one does not.
No credit pull to get started. This is not a commitment to lend. Equal Housing Opportunity.
