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FHA Streamline Refinance

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FHA Streamline Refinance

The FHA Streamline Refinance is a special mortgage product, reserved for homeowners with existing FHA mortgages. Homeowners with conventional mortgages via Fannie Mae or Freddie can’t use it. FHA Streamline Refinances are the fastest, simplest way for FHA-insured homeowners to refinance their respective mortgages.

The FHA Streamline Refinance program’s defining characteristic is that it does not always require a home appraisal. Instead, the FHA will allow you to use your original purchase price as your home’s current value, regardless of what your home is actually worth today.

Except for this “no appraisal” benefit, the FHA Streamline Refinance is very much like other loan products. It’s available as a fixed rate or adjustable mortgage; it comes with 15- or 30-year terms; and there’s no prepayment penalty to worry about.

Another big plus is that FHA mortgage rates are as low with the Streamline Refinance program as with “regular” FHA loans.

Are You FHA Streamline Refinance Eligible?

Although the FHA Streamline Refinance eschews the “traditional” mortgage verifications of income and credit score, as examples, the program does enforce minimum standards for applicants. The official FHA Streamline Refinance guidelines are below.

Perfect, 12-Month Payment History Is Required

  • The FHA’s main goal is to reduce its overall loan pool risk. Therefore, it’s number one qualification standard is that homeowners using the Streamline Refinance program must have a perfect payment history stretching back 12 months. 30-day, 60-day, and 90-day lates are not allowed. Furthermore, loans must be current at the time of closing.
  • 210-Day “Waiting Period” Between Refinances
  • The FHA requires that borrowers make 6 mortgage payments on their current FHA-insured loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance.

A Streamlined FHA Refinance Must Have “Purpose”

Streamline Refinance applicants must demonstrate that there’s a Net Tangible Benefit in the refinance; a legitimate reason for refinancing. Loosely, Net Tangible Benefit is defined as reducing the (principal + interest + mortgage insurance) component of the mortgage payment by 5 percent or more. Another allowable Net Tangible Benefit is to refinance from an adjusting ARM into a fixed rate loan. Taking “cash out” to pay bills is not an allowable Net Tangible Benefit.

Loan Balances May Not Increase To Cover Loan Costs

The FHA prohibits increasing a Streamline Refinance’s loan balance to cover associated loan charges. The new loan balance is limited by the math formula of (Current Principal Balance + Upfront Mortgage Insurance Premium). All other costs — origination charges, title charges, escrow population — must be either (1) Paid by the borrower as cash at closing, or (2) Credited by the loan officer in full. The latter is called a “zero-cost FHA Streamline”.

Appraisals Not Required – in Some Cases

In some cases – FHA loans are not subject to the home value. Therefore, there are times the FHA does not require appraisals for its Streamline Refinance program. Instead, it uses the original purchase price of your home, or the most recent appraised value, as its valuation point. Some homes that are underwater are still FHA Streamline-eligible.

FHA Streamline Refinance Mortgage Insurance Requirements

The FHA Streamline Refinance is an FHA-insured mortgage, and FHA borrowers are required to make two types of mortgage insurance payments — an upfront mortgage insurance payment paid at closing, plus an annual one split into 12 installments, paid with your mortgage payment each month.

With respect to mortgage insurance premiums, as of June 11, 2012, homeowners using the FHA Streamline Refinance program are split into two classes :

  1. Homeowners whose new loan replaces an FHA-backed mortgage endorsed before June 1, 2009
  2. Homeowners whose new loan replaces an FHA-backed mortgage endorsed on/after June 1, 2009.

Beginning June 11, 2012, homeowners in the first class — those with “old” FHA mortgages to refinance — will pay markedly lower mortgage insurance than homeowners in the second class of borrowers.

FHA Streamline Refinance MIP (For Loans Endorsed Before June 1, 2009)

If your existing FHA mortgage was endorsed prior to June 1, 2009, your mortgage insurance premiums have been “grandfathered”. You can refinance to the FHA Streamline Refinance program and pay reduced rates for both for upfront MIP and annual mortgage insurance premiums.

Upfront MIP

For an FHA Streamline Refinance that replaces a loan endorsed prior to June 1, 2009, the new FHA mortgage’s upfront mortgage insurance is equal to 0.01 percent of the loan size, or 1 basis point.

For example, if your new FHA Streamline Refinance is for $100,000 mortgage, the FHA will assess a $10 upfront mortgage insurance premium (MIP) to be paid by you at closing. The FHA automatically adds the $10 payment to your new loan balance.

Annual MIP

Annual MIP is similarly cheap. For an FHA Streamline Refinance that replaces a FHA loan endorsed prior to June 1, 2009, the annual MIP is 0.55% annually, or 55 basis points.

The complete annual MIP schedule is as follows :

  • 15-year loan terms with loan-to-value over 90% : 0.55 percent annual MIP
  • 15-year loan terms with loan-to-value under 90% : 0.55 percent annual MIP
  • 30-year loan terms with loan-to-value over 95% : 0.55 percent annual MIP
  • 30-year loan terms with loan-to-value under 95% : 0.55 percent annual MIP
  • 15-year fixed rate mortgages with LTVs of 78% or less pay no annual MIP.

There are county specific loan size limits across the country, and we can tell you what the limit is for your home.

FHA Streamline MIP For Loans Endorsed On/After June 1, 2009

If your existing FHA mortgage was endorsed on, or after, June 1, 2009, your new FHA mortgage insurance premiums are the same as for all other FHA mortgage applicants.

Upfront MIP

For an FHA Streamline Refinance that replaces a loan endorsed on, or after, June 1, 2009, the new FHA mortgage’s upfront mortgage insurance is equal to 1.75 percent of the loan size, or 175 basis points.

For example, if your new FHA Streamline Refinance is for $100,000 mortgage, the FHA will assess a $1,750 upfront mortgage insurance premium (MIP) to be paid by you at closing. The FHA automatically rolls the $1,750 payment into your new loan balance.

Not all FHA homeowners will pay this full amount, however.

One great thing about the FHA Streamline Refinance program is that the FHA offers refund on previously-paid upfront MIP so long as you’re still within the first 3 years of your mortgage.

As an example, refinancing after 11 months grants a 60% refund, but waiting just one more month lowers that refund down to 58%. This is why is rarely a good idea to “wait to refinance” with the FHA. With the FHA Streamline Refinance, the sooner you refinance, the bigger your MIP refund, and the lower your final loan size. This preserves home equity.

Annual MIP

For an FHA Streamline Refinance that replaces a FHA loan endorsed on, or after, June 1, 2009, the annual MIP varies based on loan type and loan-to-value.

The annual MIP schedule, for loans with case numbers assigned on, of after, June 1, 2009 :

  • 15-year loan terms with loan-to-value over 90% : 0.60 percent annual MIP
  • 15-year loan terms with loan-to-value under 90% : 0.35 percent annual MIP
  • 30-year loan terms with loan-to-value over 95% : 1.25 percent annual MIP
  • 30-year loan terms with loan-to-value under 95% : 1.20 percent annual MIP

15-year fixed rate mortgages with LTVs of 78% or less pay no annual MIP. Mortgages made for $625,500 or more are subject to an additional 0.25 percent annual mortgage insurance fee.

Note that mortgage insurance payments are included in the FHA’s Net Tangible Benefit requirement. You must lower your monthly payment by at 5 percent to qualify for the FHA Streamline Refinance.

To Apply For Your FHA Streamline Refinance Fill Out The Form On The Left Or Give Us A Call 720-943-4278.

The FHA Streamline Refinance is among the easiest and best-valued mortgage products available.

If you have an existing FHA mortgage, get yourself a FHA Streamline Refinance rate quote. FHA mortgage rates are low and my office underwrites and funds FHA loan in-house. This means we can close your mortgage faster.

NOTE : FHA Streamline Refinance information is accurate as of today,  . If you get your FHA Streamline Refinance information elsewhere online, it may be inaccurate or out-of-date. FHA mortgage guidelines change often.

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