FHA Streamline Refinance Mortgage: What To Know & How To Get Approved
The FHA Streamline Refinance is a No Verification Loan and the simplest, fastest way to refinance. With no requirements to verify income, savings, employment, or credit score, many homeowners close on their streamlined refinance loan in fewer than 3 weeks.
What Is An FHA Streamline Refinance?
The FHA Streamline Refinance is a mortgage refinance program that requires no verification of income, no verification of employment, no checks of a credit score; and, requires no home appraisal as part of the loan approval process.
The program is sometimes called the FHA-to-FHA refinance.
FHA Streamline Refinance loans are available to homeowners with an existing FHA mortgage, and they’re among the simplest ways for a homeowner to lower their mortgage rate and payment.
Homeowners must only meet two standards to get FHA Streamline Refinance-approved:
- Show that your mortgage payments have been mostly on-time over the last six months
- Show that the refinance will give you a lower monthly payment than what you have now
There’s no back-and-forth with an FHA lender as part of the refinance approval. Tax returns and bank statements aren’t required. Negative changes in home value aren’t considered.
You can even get approved if you’re out of a job or newly self-employed.
The FHA Streamline Refinance is often described as a reduced-documentation refinance, available to existing FHA homeowners only.
It’s closer to a no-documentation refinance, though. Almost nothing is required to be verified.
All you have to show is that your mortgage payment history has been semi-decent, and that your new FHA mortgage will give you a lower monthly payment.
Many FHA Streamline Refinance loans close in fewer than 3 weeks.
Why Does The FHA Allow No Verification Mortgages?
The FHA Streamline Refinance is the closest thing in lending to a No Verification Mortgage.
As compared to a non-streamlined refinance, the FHA streamline skips dozens of verifications, which reduces the amount of paperwork and time required to close on a loan.
The income, the assets, and the employment of a homeowner aren’t verified. The proof of residency and home appraisal get skipped. Not even credit scores get checked.
Now, if you think these rules sound different from how a mortgage lender would typically write its loan guidelines, you’re right. And, there’s a reason for that.
The FHA doesn’t require paperwork and verifications with its FHA Streamline Refinance program because the FHA is not a mortgage lender.
The FHA is a mortgage insurer.
The FHA provides insurance to mortgage lenders, covering more than a trillion dollars worth of loans nationwide. When a mortgage lender’s FHA-insured loans go bad, the FHA pay cash to the bank for the loss.
The FHA Streamline Refinance guidelines seem smart, in that context.
The FHA provides insurance on your loan whether you refinance or not, so when you can show at least a decent payment history and some amount of savings, it’s to the FHA’s benefit for you to refinance.
The FHA gives homeowners access to a No Verification Refinance because it helps the homeowner, and it helps the FHA.
Table: Verifications Not Required With An FHA Streamline Refinance
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The 5 Incredibly Simple Rules For FHA Streamline Refinance Approval
The FHA Streamline Refinance approval process is streamlined, which is a mortgage term defined as less paperwork for the borrower and fewer verifications performed by the lender.
With the FHA Streamline Refinance, the streamlined approval process is about as streamlined as streamlined can get.
Official FHA mortgage guidelines state that income, asset, and credit checks can be skipped; that appraisals of homes aren’t necessary; and, that it doesn’t matter whether a home has lost or gained value over time.
The FHA wants to see just five things.
1. Your FHA loan must have six payments made on it, at least
As part of the FHA Streamline Refinance approval process, your loan must meet the FHA’s seasoning minimums.
Seasoning is the amount of time that’s passed since your closing.
FHA mortgage guidelines require you to have made at least six payments on your loan, and for at least 210 days to have passed since your mortgage closing date.
Loans that are older than seven months, with all payments made, meet the FHA’s seasoning requirement automatically.
2. Your payment history must not include more than one 30-day late in the last 6 months
The FHA requires verification of your mortgage payment history to be FHA Streamline Refinance-approved.
There are several ways to prove your 6-month mortgage payment history.
- Show copies / take pictures of canceled checks from your bank
- Show copies / take pictures of receipts from online bill pay
- Ask your mortgage company to send your payment history via email
Or, you can ask your new lender to retrieve your payment history for you, which is what most people opt to do.
Downloading your mortgage payment history is a quick and simple step for a lender.
3. You must be current on the FHA loan being refinanced
To use the FHA Streamline Refinance, the Federal Housing Administration requires that you’re caught-up and current with your home’s mortgage payments.
If you’ve recently missed a month of payments, that’s okay. The FHA just wants to see that you’re current on your loan as of today.
4. You must be getting a lower monthly payment or some other important benefit
As part of your refinance mortgage approval, the FHA will verify that there’s an actual benefit from you doing the refinance.
The FHA calls this check its Net Tangible Benefit test, and its formula for getting to “Yes” is straight-forward.
Using simple math, it compares the sum of your current mortgage’s interest rate plus its FHA mortgage insurance premiums (MIP) rate to the sum of your new one.
The FHA refers to this sum as your Combined Rate and its sole purpose is to determine whether there’s an FHA-approved benefit to you refinancing your home.
The FHA wants to make sure you’re saving money.
The FHA’s test for borrower benefit is in keeping with its role as a mortgage insurance company; it wants you to emerge from your refinance with lower monthly payments, which makes you less risk to its insurance fund.
The Net Tangible Benefit test ensures that this happens.
5. Your closing costs must be paid by your lender or with your personal cash
The FHA requires everyone using the FHA Streamline Refinance to pay for their loan closing costs using cash or using money from a lender.
Closing costs on streamlined refinances can’t be “rolled in” to the loan, which is when closing costs are paid using home equity, then added to a homeowner’s total loan amount.
The FHA prohibits homeowners from rolling-in closing costs because rolling-in closing costs raises homeowners’ mortgage balances, which adds risk to the FHA’s insurance fund.
Homeowners have two ways to pay for closing costs, then:
- Pay using cash that’s in a bank or investment account
- Pay using the lender’s money, via a zero-closing cost option
The zero-closing cost option is when a mortgage lender agrees to pay all of a borrower’s closing costs in exchange for a small increase to its mortgage rate.
Costs don’t discount or disappear with the zero-closing cost option. They still exist. They’re paid by the lender instead of you, which drops your upfront costs to zero.
As with most refinance loans, the zero-closing cost option on an FHA Streamline Refinance will often be a “better deal” as compared to paying loan fees from your bank account.
Mention it to your lender.
The Benefit Test: How Lenders Decide Whether Your Refinance Makes Sense
The FHA Net Tangible Benefit test confuses a lot of people. It requires a little bit of math, and a little bit of understanding about how FHA loans work.
It wasn’t always this complicated, though. Up until 2015, finding the Net Tangible Benefit was easy. All the FHA wanted to see what a 5% reduction in mortgage payment.
If you could show that, then you passed the test.
Today, by contrast, you have to know your current FHA loan’s Combined Rate, which is a sum that’s not listed on your mortgage statement and which doesn’t show up in your closing paperwork; and, you have to know what your Combined Rate might be after your finish your upcoming refi.
It can be easier to just ask for someone’s help.
A mortgage lender can find your Combined Rate pretty quickly, and can help your find determine whether you meet the FHA’s Net Tangible Benefit requirement.
If you’re into it, though, here’s the official Net Tangible Benefit guide, broken down by mortgage product.
When your current FHA mortgage is a 15-year fixed rate loan
When your current FHA mortgage is a 30-year fixed rate loan
When your current FHA mortgage is an ARM scheduled to adjust prior to March 2019
When your current FHA mortgage is an ARM scheduled to adjust after March 2019
Get A Refund On Your FHA Mortgage Insurance Premiums
The FHA is a mortgage insurance company and, like all insurance companies, it charges premiums to its customers.
The group assesses two types of mortgage insurance.
The first type is paid monthly as part of your regular mortgage payment. You don’t write a separate check for it, and there’s nothing for you to do. This insurance type is known as FHA MIP, which stands for FHA Mortgage Insurance Premium.
The second FHA mortgage insurance type is collected just once — upfront at the time of closing.
It’s called FHA Upfront Mortgage Insurance Premium (FHA UFMIP), and the Federal Housing Administration adds it to your loan balance for you directly; you don’t have to pay for it with cash.
You can also get a refund on it.
Depending on how soon you refinance, the FHA will refund up to 80% of your original FHA upfront mortgage insurance premium, and put that money toward your upcoming loan.
The FHA MIP refund is diminishing, though. Each month, it shrinks; and after three years, it’s gone entirely.
To maximize your FHA MIP refund, therefore, it’s smart to start your FHA Streamline Refinance as soon as you possibly can.
How To Start With An FHA Streamline Refinance
It’s simple to get started with an FHA Streamline Refinance.
First, you’ll want to make sure you’re eligible. That means checking for three things in your payment history:
- You’ve made at least six payments on your current FHA mortgage
- You’re paid up-to-date on your mortgage
- In the last six months, you’ve been on-time with your payments, and haven’t had more than one month where you were 30 days late
If these three items check out, all that’s left is do the Net Tangible Benefit test, which makes sure there’s a legitimate reason for you to refinance.
Examples of benefits include:
- Getting a lower mortgage rate and payment
- Switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage
- Shortening your mortgage term from 30 years to 15 years
Doing the FHA Net Tangible Benefit test might require a lender’s assistance, so this would be a good time to make contact with a person who can help you.
Your current mortgage company can help via their customer service call center. Or, if you prefer to get help more quickly, you can click here to get today’s FHA mortgage rates.
Common FHA Streamline Refinance Questions
The FHA Streamline Refinance program is a no-verification refinance loan available to U.S. homeowners. The program is straight-forward, but you may have questions.
Here are some of the common questions people ask about the FHA Streamline Refinance.
Why does my lender say verifications are required for my FHA Streamline Refinance, when this article says they’re not?
The FHA maintains a rulebook for the FHA Streamline Refinance program, which is known as the FHA mortgage guidelines.
FHA guidelines state that no verifications are required for an FHA Streamline Refinance approval apart from checking for payment history and Net Tangible Benefit.
Not all lenders follow those rules, however. Many impose additional restrictions that make it tougher for homeowners to get their mortgage FHA Streamline Refinance-approved.
Mortgage lenders sometimes ask for verification of income, or of employment, or of credit as part of their FHA streamline approval process.
Remember that you have a choice in lenders. If you don’t like the information your lender is giving you, shop your loan to someone else; someone who abides by the official FHA Streamline Refinance mortgage guidelines.
Want that second opinion? Click here to connect with our lender.
How much are FHA mortgage rates?
Like all government-backed mortgage rates, FHA rates are based on the price of mortgage bonds, which are securities traded on Wall Street. And, also like all government-backed rates, FHA mortgage rates change constantly.
However, because the Federal Housing Administration insures FHA loans against loss, the loans are less risk to the lenders that make them as compared to comparable loans via Fannie Mae or Freddie Mac.
FHA mortgage rates are generally one-eighth to a one-quarter percent below conforming mortgage rates.
How much are FHA Streamline Refinance closing costs?
FHA Streamline Refinance closing costs vary by lender, by location, and by loan.
Lender closing costs will generally fall within a range of $500 to $900, and borrowers can face state-mandated fees that begin at a few hundred dollars.
However, most homeowners choose the zero-closing cost option with their FHA Streamline Refinance, so no costs are paid whatsoever.
How much will I save with an FHA Streamline Refinance?
Every homeowner will save a different amount using the FHA Streamline Refinance program, and there’s no maximum to how much your payment can fall.
However, there is a defined minimum.
To get approved for an FHA Streamline Refinance, the Federal Housing Administration requires homeowners to take a reduction of at least 0.50 percentage points on their mortgage rate and FHA MIP rate combined.
How do I know if my current loan is an FHA mortgage?
There are a few ways to determine whether your current mortgage is FHA-insured.
The simplest way to know if your loan is FHA is to look at your mortgage statement for the term “FHA.” It might appear at the top, where your loan terms are listed; or, within the line-items of your mortgage payment.
Another way to know if your current loan is FHA-insured is to look for the term “FHA MIP” or “MIP Fee” on your statement. If it’s there, your loan is an FHA mortgage.
A third way is to call your mortgage company’s customer service center and ask, “Is my loan an FHA mortgage?”
I have a VA loan right now. Can I do an FHA Streamline Refinance?
No, the FHA Streamline Refinance is for homeowners with existing FHA loans only. Homeowners with VA loans can use the VA Streamline Refinance program, which is the Department of Veterans Affairs’ FHA Streamline Refinance-equivalent.
I have a USDA loan right now. Can I do an FHA Streamline Refinance?
No, the FHA Streamline Refinance is limited to homeowners whose existing loans are FHA-insured. Homeowners with USDA loans can use the USDA Streamline Refinance program, which is the U.S. Department of Agriculture’s FHA Streamline Refinance-equivalent.
Does my FHA mortgage insurance premium change when I do an FHA Streamline Refinance?
Your FHA MIP might change with an FHA Streamline Refinance, or it might not. The answer depends on whether the FHA has changed it mortgage insurance premiums since your last closing.
FHA MIP rates change infrequently, but they do change. Sometimes, they’re increased. Sometimes, they’re lowered.
When you refinance, your new loan’s MIP will be whatever the current FHA MIP rate is.
Can I cancel FHA MIP using the FHA Streamline Refinance program?
When you refinance via the FHA Streamline Refinance, you’re re-insuring your mortgage via the Federal Housing Administration so your loan will have FHA MIP.
To cancel FHA MIP, refinance your mortgage with Fannie Mae or Freddie Mac instead. A mortgage lender can explain that option, and how it works, to you.
Do I have to refinance my FHA loan with my current mortgage lender?
No, you don’t have to refinance your FHA loan with your current mortgage lender. You refinance with just about anyone.
And, it pays to shop around. Your current mortgage company may not have the today’s lowest FHA rates. Comparison shop your mortgage for the best combination of interest rate, closing costs, and service.
Choose the lender with which you feel most comfortable.
Which lender has the lowest FHA mortgage rates?
There’s no such thing as “the lender with the lowest rates” because the lender with the best mortgage rates today won’t be the one with the best mortgage rates tomorrow.
Mortgage lenders are constantly tinkering with their rates to speed up and slow down their flow of business. On some days, a lender will fight to get lowest FHA mortgage rates possible. Other days, it won’t.
You can’t know which lender’s rates will be the lowest today so take rate quotes from two different lenders, at minimum. And, if you can, get three.
Can I get an FHA Streamline Refinance if I don’t have a job right now?
Yes, you can be approved for an FHA Streamline Refinance without a job.
My mortgage is underwater. Can I still do an FHA Streamline Refinance?
Yes, you can be approved for an FHA Streamline Refinance if your home has lost value since purchase, and is currently underwater.
Will I get to skip a mortgage payment with my FHA refinance?
Technically, there’s no such thing as skipping a mortgage payment. If you’re borrowing money from a bank, you’re going to have to pay it back.
When you “skip a mortgage payment,” what really happens is that your upcoming mortgage payment gets added to your balance of your loan, which is something that FHA specifically prohibits as part of its FHA Streamline Refinance program.
When you refinance via the FHA program, you’ll pay your upcoming mortgage payment on the date of your closing. No payments get skipped.
How long does it take an FHA Streamline Refinance to close?
Many FHA Streamline Refinance loans close within 3 weeks of application.
Can I remove an ex-spouse from my mortgage through an FHA Streamline Refinance?
Yes, you can use the FHA Streamline Refinance to remove an ex-spouse from your mortgage. Two verifications are required.
First, your divorce decree or legal separation agreement must show that the property was awarded to you; and, that payment responsibility on the home is yours, too.
Second, you must show that the most recent six payments on the home came from a bank account with your name on it.
When you can show these two things, you can refinance your home out of your ex-spouse’s name.
My co-borrower has died. Can I refinance using the FHA Streamline Refinance?
Yes, you can refinance and remove a co-borrower via the FHA Streamline Refinance program if that co-borrower has died.
Can I take “cash out” using the FHA Streamline Refinance program?
No, the FHA Streamline Refinance program is a no-cash-out mortgage refinance.
What credit score do I need for the FHA Streamline Refinance?
There is no credit score requirement with the FHA Streamline Refinance program. Your credit score can be lower than 620; it can be lower than 600; it can be lower than 580.
There is no minimum credit score with the FHA Streamline Refinance.
How much income do I need to qualify for an FHA Streamline Refinance?
There are no income requirements with the FHA Streamline Refinance because your income is not verified as part of your approval.
You can be approved if your income is erratic, if it recently dropped, and even if you’re currently unemployed.
Can I do an FHA Streamline Refinance on an investment property?
Yes, you can use the FHA Streamline Refinance program on an investment property.
I’m self-employed with less than two years experience. Can I get an FHA streamlined loan?
Yes, you can use the FHA Streamline Refinance if you’re self-employed with less than two years experience in your new job. Your employment will not be verified as part of your FHA Streamline Refinance approval.
Can I FHA refinance my home if it’s currently for sale?
Yes, you can do an FHA Streamline Refinance on a home that’s listed for sale.
Can I get an FHA Streamline Refinance if I’m delinquent on my federal taxes?
Yes, you can get approved for an FHA Streamline Refinance if you’re delinquent on your federal taxes. FHA mortgage guidelines don’t require tax status verification.
Can I do an FHA Streamline Refinance if I assumed my current FHA loan from the prior owner of this home?
Yes, you can do an FHA Streamline Refinance on a home if you assumed its mortgage from a prior homeowner.