An FHA Streamline Refinance allows homeowners with an existing FHA loan to lower their interest rates and reduce monthly payments. It can also be used to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. The process is streamlined, meaning it’s quicker and easier, sometimes even bypassing the need for a home appraisal.

Pros of FHA Streamline Refinance

Lower Monthly Payments: You can reduce your monthly mortgage payment by securing a lower interest rate. FHA guidelines require that extending your loan term to lower your payment must also involve reducing your interest rate unless switching from an ARM to a fixed-rate mortgage.

Refinance Underwater Mortgages: You can refinance even if your mortgage is underwater, meaning you owe more than your home is worth.

Simplified Income and Credit Verification: Depending on the type of FHA Streamline you qualify for; your lender may not need to verify your income or perform a full credit check.

No Home Appraisal Needed: Most FHA Streamlines don’t require a home appraisal, simplifying the process further.

Quick Closing: The reduced documentation requirements and lack of an appraisal mean you can often close sooner.

Cons of FHA Streamline Refinance

Closing Costs: Borrowers must pay closing costs, which cannot be included in the new loan. However, these costs might be lower since you likely won’t need to pay for an appraisal or full credit check.

Limited Cash Back: FHA Streamlines only allow up to $500 in cash out.

Mortgage Insurance: You’ll continue to pay annual and upfront mortgage insurance premiums (MIP) with an FHA Streamline.

Today’s FHA Streamline Refinance Rates

Rates vary and may be offered as adjustable-rate mortgages (ARMs) or fixed-rate loans for 15 or 30 years. They change frequently, so it’s essential to compare current rates.

FHA Streamline Refinance Requirements

Existing FHA Loan: You must currently have an FHA-insured mortgage.

Net Tangible Benefit: The refinance must offer a clear financial benefit according to FHA guidelines.

Timing: At least six payments must have been made on your FHA mortgage, six months must have passed since your first payment, and 210 days must have passed since closing on your current mortgage.

On-Time Payment History: You must have a history of on-time payments.

Minimal Documentation: You’ll need to provide some basic documents, but the requirements are generally less than for other refinance options.

Other information

Often, no income verification is needed. Non-credit qualifying applications typically have minimal impact on your credit score. You can choose a different lender than the one you are currently using. As long as you meet the FHA’s guidelines, you can refinance more than once. Typically closing costs are 2% – 6% of the loan amount, but you save on the appraisal cost.

The Bottom Line

An FHA Streamline Refinance can be a smart move if you’re in good standing with your current FHA loan and want to lower your mortgage payment. If you meet the requirements, the process is quick and can save you money without needing an appraisal or extensive income verification.