What is an FHA Loan?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. These loans require lower minimum credit scores and down payments than many conventional loans, making them especially popular with first-time homebuyers. According to the FHA’s 2020 Annual Report, more than 83 percent of all FHA loan originations were for borrowers purchasing their first homes.

How Does the FHA Streamline Work?

According to the U.S. Department of Housing and Urban Development (HUD), the basic requirements for a streamlined refinance are as follows:

• The mortgage loan to be refinanced must be an FHA loan.
• The FHA mortgage loan being refinanced must be current.
• The refinance must provide a net tangible benefit to the borrower.
• Borrowers cannot take out more than $500 in cash on the refinanced mortgage.

Streamline refinances can be offered in several ways. For example, lenders may offer “no-cost” refinances where borrowers pay no out-of-pocket expenses. Instead, the lender might charge a higher interest rate if the borrower opts not to pay closing costs in cash.

Lenders are not allowed to include closing costs in the new mortgage amount of a streamlined refinance. Simply put, an FHA streamlined refinance allows current FHA loan borrowers to lower the interest rate on their mortgage without having to meet an extensive list of criteria.

What are the FHA Streamline Programs?

The FHA Streamline program is a refinancing option for current homeowners who have an FHA loan. Borrowers can choose between a five-year adjustable-rate mortgage (ARM) or a fixed-rate loan with a term of 15, 20, 25, or 30 years. This program can be used under certain conditions, such as:

• Today's mortgage rates are lower than your current mortgage rate.
• You owe more on your mortgage than the home is currently worth.

The best refinancing option depends on how much you owe, your financial situation, and how long you plan to stay in the home.

What are FHA Streamline Refinancing Costs?

When refinancing through the FHA Streamline program, borrowers are typically required to pay closing costs. A key benefit is that no appraisal is required. Homeowners can expect to pay between $1,000 and $5,000 in closing costs, although the exact amount can vary based on your loan amount, down payment, and other factors.

If the down payment is less than 20% of the home's value, lenders may require private mortgage insurance (PMI). This cost can be included in the new loan estimate and protects the lender in case the borrower stops making payments.

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If you are interested in refinancing your current FHA loan or have any questions, please reach out using the contact information below.