FHA Streamline Refinance Loan
FHA Loans Guide
If you already have an FHA loan, a streamline refinance can be one of the easiest ways to lower your payment or lock in a more stable loan without all the usual paperwork.
In many cases, it’s faster and requires less paperwork than a traditional refinance. And it can still work even if your credit score dropped or your home value isn’t what it used to be.
In a nutshell
An FHA Streamline Refinance is a refinance option for people who already have an FHA mortgage. It’s designed to be simpler and quicker, but it must provide a net tangible benefit to you, like lowering your monthly payment or improving your loan terms.
It’s important to know this option isn’t meant for taking cash out. If your goal is to tap into your home equity, consider an FHA cash-out refinance loan.
FHA Streamline Refinance Requirements
To qualify for an FHA streamline refinance, you must currently have an FHA mortgage.
You also need to:
- Have had your loan for at least 210 days: Counting from your closing date, you must have had your loan for about seven months before you can get an FHA streamline refinance. Additionally, six months must have passed since your first payment due date.
- Be current on your payments: To qualify for a streamline refinance, you must have no late payments in the last six months, and you can only have one 30-day late payment in the past 12 months.
- Prove you'll receive a "net tangible benefit": You can only do an FHA streamline refinance if you can financially benefit from it. This requires at least a 0.5% reduction in your combined rate (mortgage interest rate + mortgage insurance premium rate), a change from an adjustable rate to a fixed one, or a new term that reduces your payments or long-term interest costs.
Credit-Qualifying vs. Non-Credit-Qualifying
While streamline refinances are generally known for their easier qualification process, it should be noted that the amount of documentation required will depend on if the loan is credit-qualifying or non-credit-qualifying.
A non-credit-qualifying streamline is the simpler option. In many cases, it doesn’t require income verification and may not require a full credit review. This is often what people mean when they talk about a “low-paperwork” refinance.
A credit-qualifying streamline requires the lender to review your income and credit. This version is typically required if you’re removing a borrower from the loan or if certain risk factors apply.
Your lender will determine which type applies to your situation, but both scenarios must still meet FHA streamline refinance rules and provide a net tangible benefit.
How much does an FHA streamline refinance cost?
Even though streamline refinances often cost less than a traditional refinance, they’re not free. Like your original loan, FHA mortgage insurance still applies. This includes:
- Upfront MIP: Typically 1.75% of your loan amount
- Annual MIP: Paid monthly as part of your mortgage payment
You’ll also pay standard closing costs (typically between 3% to 6% of the loan amount). Unlike some refinance options, you generally can’t roll typical closing costs into the new loan amount. That means you should plan to bring funds to closing or talk with your lender about lender credits, which can help offset upfront costs in exchange for a slightly higher rate.
If you refinance into another FHA loan within three years of your original loan, you may qualify for a partial refund of the upfront MIP you already paid. The refund amount decreases over time and is applied toward the new upfront MIP — it isn’t paid out in cash.
Pros and Cons of an FHA Streamline Refinance
FHA streamline refinance loans can be very beneficial to those who qualify. Here are the main advantages and disadvantages they have to offer:
| Pros | Cons |
|---|---|
| Easier Qualification | Upfront Costs |
| Faster Process | MIP Paid Again |
| Lower Fees | Limited Cash-Out ($500 Cap) |
Pro: Easier Qualification
In many cases, you won’t need a credit check or income verification when applying for a streamline refinance, which can make it easier to qualify if you’ve seen a cut in income or your credit score has fallen.
You likely won’t need an appraisal either. This can be beneficial if your home has lost value and you don’t have much equity in the property.
Pro: A Faster Process
Without tedious steps like income verifications or home appraisals, FHA streamline refinances are able to move a lot faster than traditional refinance loans. You can often close on a streamline refinance in just a few weeks.
Pro: Lower Costs
Streamline refinances can be cheaper than traditional refinances since you don’t have to pay pricey fees for appraisals and credit checks. There may also be lower underwriting fees.
On top of this, FHA streamline refis must deliver a tangible financial benefit. That typically means lower monthly payments, though it could also mean a reduction in long-term interest costs (or even both).
Con: Upfront Costs
Streamline refinances don’t come for free. While they may not have all the fees of a traditional refinance, you still need to cover the upfront MIP as well as other common closing costs. Always look over your loan estimate carefully to be sure you’ve budgeted properly for these costs.
Con: MIP Double-Down
The upfront MIP fee is meant to be a one-time cost, and at 1.75% of the loan amount, it can be quite pricey. If you refinance, you need to pay this upfront cost again, only adding to the total long-term costs of your loan.
If you got your original loan within the last three years, you should be due a partial MIP refund. These refunds vary based on how long ago you closed on your loan and go up to 80% of your original premium.
For example, if you refinance your FHA loan within 12 months of the purchase, you will receive a refund of 58% of your upfront MIP. However, if you wait the full three years to refinance, you will only receive a refund equal to just 10% of your upfront MIP. This refund will not be a cash payment but instead will be applied to the upfront MIP payment needed when you refinance a new FHA loan.
Con: Limited Cash-Out
While cash-out refinances allow you to tap home equity, FHA streamline refinances are limited. HUD caps the cash-out amount at $500 on these loans.
Is an FHA Streamline Refinance A Good Idea?
An FHA streamline refinance can be a very smart move for the right borrower, but whether it’s right for you depends on your goals, finances, and how long you’ve had the loan. Use the guidelines below to determine if one fits your situation.
The FHA Streamline is Good If You…
- Are worried about qualifying for a refinance due to your credit score or home value
- Want a faster and easier refinancing process
- Don't think your home will appraise for a very high amount
- Already have an FHA loan
- Want to reduce your monthly or long-term costs
Skip This Option If You…
- Don't have an existing FHA mortgage loan
- Want to take a lot of cash out
- Have been late on your monthly payments several times
- Have had your loan for less than six months
- Won't see a net tangible benefit from the refinance
- Don't want to pay an upfront MIP twice
How to Apply For an FHA Streamline Refinance
If you think a streamline refinance might make sense for you, here’s what the next steps typically look like:
-
Confirm you have an FHA loan.
This option only works for existing FHA mortgages. -
Review your payment history.
You’ll need to be current on your loan and meet the minimum waiting period requirements. -
Compare your potential savings.
A streamline refinance must provide a net tangible benefit, so the numbers need to work in your favor. -
Talk with a loan specialist.
They’ll help you determine whether you qualify for a credit-qualifying or non-credit-qualifying streamline and walk you through your options.
Refinancing should move you closer to your goals, whether that’s lowering your monthly payment or creating more stability in your budget. A quick conversation can help you decide if this is the right next step.
Other Refinance Options
A streamline refinance isn't your only option if you have an existing FHA mortgage loan. Another option is different types of FHA refinances, like a simple or cashout refinance. conventional loans, jumbo loans, or VA loans, depending on what you need.
Here's how alternatives compare:
| Refinance Type | Eligibility Requirements* | Loan Limits | Cash-out allowed? | Appraisal and credit check required? |
|---|---|---|---|---|
| Conventional | 620 credit score 45% debt-to-income ratio 3% down payment |
$832,750 | Yes | Usually |
| VA |
No credit score minimum (usually 620, but varies by lender) 41% debt-to-income ratio No down payment Must be a Veteran or military member |
None | Yes | Yes |
| Jumbo | Requirements vary by lender | Varies by lender but higher than other options | Yes | Yes |
*VA loans are regulated by the VA, which sets general eligibility equirements, however, lenders can set credit score minimums above those benchmarks.
FAQs about FHA Streamline Refinancing
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