FHA Streamline Refinance
The FHA streamline refinance is a refinance option reserved to work exclusively with home owners who hold an FHA home loan. This refinance program is “streamlined” because it removes some key qualification factors that typically slow the refinance process. The biggest requirement that is waived is a home appraisal. If you choose to refinance your FHA loan, the FHA will allow you to use the original purchase price of your home as the value, even though your home may currently be worth much less than what you paid.
In addition to not requiring a home appraisal, the FHA streamline refinance program welcomes homeowners who are underwater on their loan to apply for a refinance. There is no loan-to-value (LTV) limit on FHA streamline refinance approvals, which is welcome news for owners in states that have been impacted the most by declining home values.
Qualifying for an FHA Streamline Refinance
The FHA’s intention is to help as many homeowners as possible qualify for a streamline refinance. The qualifications are minimal compare to standard refinances, but there are some restrictions according to the FHA handbook:
- The homeowner can only have one 30-day late payment in the last 12 months, but zero in the past 3 months.
- Potential refinancers must have made at least six mortgage payments on their current FHA mortgage. Additionally, if the home owner has previously refinanced, they must wait at least 210 days before they are eligible to refinance again.
- The home loan may only be approved if it the new mortgage payment demonstrates monthly savings. The new payment has to decrease by at least 5%.
Closing Fees, Mortgage Insurance, and Other Costs
Closing costs on an FHA streamline are similar to other loans, but a bit lower since no appraisal is required. In some cases the lender, at the borrower’s request, can give a higher rate and use the extra profits from the loan to pay for closing costs. Ask your loan originator if this is an option in your case.
Mortgage insurance may be reduced if the underlying loan was accepted by FHA prior to May 31, 2009. Otherwise, FHA streamlines are subject to the standard FHA upfront mortgage insurance fee.
In addition to the upfront mortgage insurance, which is a one-time fee, there is also monthly mortgage insurance. The amount of monthly mortgage insurance that you pay depends on the value of your home and the date that you purchased it.
On April 9, 2012, upfront and monthly premuims increased.
Loans with terms greater than 15 years:
- 95%+ LTV requires a 1.75% upfront fee and a 1.25% annual fee, payable in 1/12 installments each month and added to the mortgage payment.
- Loans with less than or equal to 95% LTV require a 1.75% upfront fee and a 1.20% annual fee.
Loans with terms equal to or less than 15 years:
- Loans with an LTV of more than 90% require a .60% annual fee
- Loans with an LTV of 90% and below require a .35% annual fee.
In addition, FHA loans with less than 78% LTV and have a term of 15 years or less are exempt from the annual fee. Loan amounts above $625,500 are subject to a .25% increase in the annual fee.
As of April 1, 2013, the annual fee will be going up again. The annual fee for loans at or below $625,500 will rise 0.10% per year and the annual fee for loans above $625,500 will rise 0.05% per year.
Apply for an FHA Streamline Refinance
If you have an FHA home loan and are interested in learning about possible money-saving refinance options, contact an FHA-approved mortgage lender . If an FHA refinance is right for you, they will be able to provide you with a free refinance quote and help you understand the next steps to start saving on your home loan.