FHA Streamlined Refi Offers Great Options to Lower Rate

FHA allows a current FHA Mortgagor to refinance their mortgage under the Streamline Refinance Program. Streamline refers to a reduced amount of documentation needed to refinance the mortgage. The basic requirements of the program are:

• The mortgage to be refinanced must already be FHA insured.


• The mortgage to be refinanced should be current (not delinquent).


• The refinance is to result in a lowering of the borrower's monthly principal and interest payments.


• No cash may be taken out on mortgages refinanced using the streamline refinance process.

Many lenders also require a minimum credit score for the streamline program.

Streamline Refinance With an Appraisal

If an appraisal is performed for the refinance, the new mortgage balance is limited to 96.65% of the appraised value. However, the borrower may not receive cash out on a streamline refinance. The new mortgage may include the unpaid principal balance of the mortgage, closing costs and prepaid items (e.g interest, initial escrow account deposit, etc.).

Streamline Refinance Without an Appraisal

A streamline refinance can also be done without an appraisal. In this case the new mortgage is limited to the original mortgage amount. Closing costs and prepaids may be included in the mortgage but only up to the original loan amount. Borrowers using this option may incur out of pocket expenses to refinance their mortgage.

This has been a great option lately for those homeowners who are currently upside down (owe more on the home than the home is worth) on their homes. Since no appraisal is done, no one knows if this is an issue or not. Also, a property that was originally purchased with an FHA mortgage and has since been converted to an investment property can only be refinanced with an FHA streamline refinance without an appraisal.

No-Cost/Low-Cost Refinances

Although not unique to FHA refinances, many borrowers refinancing using the streamline refinance opt for a no-cost refinance. In exchange for a slightly higher interest rate, the lender will pay a portion (low-cost) or all of the closing costs of the mortgage. This is especially popular with the streamline refinance without an appraisal because the borrower will usually be able to roll less of the costs into the mortgage. With interest rates at historic lows lately, this option is very attractive since you can still get a phenomenal interest rate and use less of your equity to pay closing costs.

If you are thinking of refinancing your FHA loan, please give me a call so we can see if this might be right for you! You can call me at 708-473-7688 or email BarkerLoans@gmail.com