FHA Streamline Mortgage

Traditionally, refinancing a mortgage requires the same type of documentation and qualifications as does a standard mortgage; however, refinancing can be obtained without having to go through the usual qualifying process. The FHA launched a program in the 1980s called a streamline refinance, which cuts down on the amount of documentation and underwriting that must be done by the lender.

There are a few requirements for a streamlined FHA refinance; first, the mortgage has to already be FHA insured, and the mortgage being refinanced must be current and not in a delinquent state. The refinance should result in the borrower’s monthly payments being lowered, and no cash may be taken out as part of the refinance process. Only minor cash back adjustments may be made at time of closing, for up to $250.

Some lenders offer no cost FHA streamlined refinances. These types of refinance loans carry a slightly higher interest rate, but the borrower has no out-of-pocket expenses and the lender pays all closing costs. Or, the lender may offer a streamline refinance in which closing costs are folded into the new mortgage amount, although this can be done only if there is adequate equity in the property.

In some cases, an appraisal is not required, so long as the new loan does not exceed the amount currently owed, that is, closing costs may not be added into the new amount. FHA streamline refinances are available both for primary residences and investment property.

The advantage of this FHA streamline refinance is that the borrower does not have to go through the qualifying procedures and documentation that would otherwise be required to obtain a standard refinance loan.