FHA Streamline Refinance: What You Need to Know
“FHA Streamline Refinance” refers to a process of refinancing a FHA mortgage and specifically the amount of documentation and underwriting that is required to be completed by the lender. The process (as any refinance) involves certain closing costs that are either paid up-front or rolled into the amount of refinance.
The requirements for the FHA Streamline Refinance are as follows:
- The mortgage to be refinanced must already be FHA insured
- The mortgage to be refinanced should be current and in good standing (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.
There are a few different ways the lenders may offer FHA streamline Refinance. Some may offer it at no out-of-pocket costs by charging a higher interest rate on the new loan. Charging this premium allows the lender to pay the closing costs associated with the refinance.
Other lenders may offer FHA streamline refinance by rolling the closing costs into the amount of the new mortgage. Of course this can only be done if the property equity allows for such transaction. This is determined by an appraisal, however the new loan amount cannot exceed the original loan amount.
Properties where the borrower does not reside as their primary residence (such as investment properties) may only be refinanced without an appraisal.
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