The FHA Streamline Refinance guidelines are certainly different from all other mortgage refinance loan programs, but they are not too hard to qualify for. A traditional refinance loan when compared with an FHA streamline refinance usually requires a lot more.
The FHA Streamline Refinance Option
An FHA streamline is rather quicker than any other refinance process as it typically does not require:
- Verification of employment
- Verification of income
- Verification of credit score
- Home Appraisal
One of the goals of a the Federal Housing Administration (FHA) was to help first-time homebuyers achieve their dream of homeownership, by making mortgage loans more affordable without the requirement of a perfect credit score.
Today, the FHA has helped homebuyers nationwide obtain a mortgage loan, but it has made it possible to retain one as well. By offering the option to refinance their current mortgage rates and monthly payments, these homeowners are able to save even more on reduced rates and payments. This also helps prevent from many mortgage loan defaults throughout the years for FHA-insured mortgages.
FHA Streamline Refinance Eligibility Guidelines
One thing that should not be taken without an open mind are the no requirements of amn FHA streamline refinance process. For instance, even though there has been majority of cases that prove no verification of income or employment was necessary, not all lenders are the same and every lending institution may have their own qualification standards set. It would still be in your best interest to try and have all documentations should you be asked to provide any.
Credit History Requirements
While the FHA Streamline Refinance process may be a lot more lenient than a traditional as it only qualifies existing FHA-insured mortgage borrowers, a 3 month perfect payment history is usually required for the approval of a streamline refinance. There must not be any late payments with the duration of:
If you do have a late payment, there may be an exception of it being no more than one (1) late payment within the past 12 months.
Credit Score Requirements
The FHA streamline refinance may state that a credit score verification is not required, but this doesn’t mean that you should not take care and maintain your credit rating for as preparation for the streamline process.
Another important thing to keep in mind is the waiting period required to be eligible for an FHA streamline refinance, which is usually 210 days before you can refinance or refinance again. The 210 days waiting period would start from the closing date of the most recent refinance.
The Reason for Refinancing with FHA streamline
In order to be considered an eligible applicant at all for the FHA streamline program, you would need to have a legitimate reason as to why you are choosing to refinance. Here are the two considerable reasons for an FHA streamline refinance:
- Reduction of the Principal, interest, and mortgage insurance by at least five (5) percent or higher
- Switching from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Loan
The FHA streamline refinance option is one that benefits, even though some homeowners may consider cashing out via refinance would benefit them in paying for other essential household needs or bills in general; this is something that is usually not allowed.
The costs of an FHA streamline refinance can be handled in two ways:
- The borrower can pay in cash at closing
- The loan officer can credit the payment in full
Expected charges that can be included in the refinance process are factors such as:
- Origination Fee
- Title Fee
- Growth in Escrow
The FHA strongly do not allow for a Streamline refi loan balance to to increase just so borrowers can include the costs in their new mortgage loan payment.
Mortgage Insurance Requirements for an FHA Streamline Refi
With any FHA-insured mortgage, mortgage insurance premiums are required. There are two types that borrowers must oblige to such as, an Upfront Mortgage Insurance Premium (UFMIP) which is due at the time of closing and then there is the annual mortgage insurance premium that can sometimes be split into 12 installments that would be incuded in the monthly mortgage payment.
As of January 26, 2015, new FHA borrowers were given the benefit of a new and reduced annual mortgage insurance premium rates, by as much as 0.50% and the upfront was reduced by 0.01%.
FHA Home Loans Endorsed Before June 1, 2009
Existing FHA mortgage loans that were endorsed before the 1st of June 2009, may be eligible for a streamline refinance to take advantage of 2015’s reduced upfront and annual MIP rates. The Annual MIP schedule may look something like this:
- 15-year loan terms & LTV above 90% – 0.55 percent annual MIP
- 15-year loan terms & LTV under 90% – 0.55 percent annual MIP
- 30-year loan terms & LTV above 95% – 0.55 percent annual MIP
- 30-year loan terms & LTV under 95% – 0.55 percent annual MIP
For a new FHA loan issued through the FHA streamline refinance program, the FHA upfront premium may be 0.01 percent of the loan amount.
FHA mortgage loans being refinanced with the endorsement date of June 1, 2009 or after may expect an Annual MIP schedule of:
- 15-year loan terms & LTV above 90% – 0.70 percent annual MIP
- 15-year loan terms & LTV under 90% – 0.45 percent annual MIP
- 30-year loan terms & LTV above 95% – 0.85 percent annual MIP
- 30-year loan terms & LTV under 95% – 0.80 percent annual MIP
For a new FHA loan issued through the FHA streamline refinance program, the FHA upfront premium may be 1.75 percent of the loan amount.