FHA Streamline Refinance: rates and guidelines for 2020
The FHA Streamline Refinance
If you currently have an FHA mortgage, the FHA Streamline Refinance is the easiest way to get a lower rate and monthly payment.
The FHA Streamline is a “low-doc” refinance with limited paperwork required; the lender doesn’t have to verify your income or credit, and there’s no home appraisal. That means a Streamline Refinance closes faster than other loans and has slightly cheaper closing costs.
Thanks to the FHA Streamline, those with FHA loans have easier access to today’s low rates than most homeowners.Verify your FHA Streamline Refinance Eligibility. (Sep 21st, 2020)
In this article:
- What is the FHA Streamline Refinance?
- Today’s FHA Streamline rates
- FHA MIP refund chart
- How the FHA Streamline works
- No home appraisal
- Reduced documentation
- Are you eligible for an FHA Streamline Refinance?
- Should you use the FHA Streamline?
- What happens to FHA mortgage insurance when I refinance?
- FHA MIP cancellation policy
- Streamline Refinance FAQ
What is the FHA Streamline Refinance?
The FHA Streamline is a special refinance product, reserved for homeowners with existing FHA mortgages. An FHA Streamline is the fastest, simplest way for FHA-insured homeowners to refinance their mortgages into today’s low mortgage rates.
Benefits of the FHA Streamline program include:
- Low refinance rates — FHA loan rates averaged 3.94% in October, 2019 (the most recent data available). This is an incredibly low rate compared to recent history
- Lower MIP rates — If you got an FHA loan between 2010 and 2015, you may be able to lower your annual mortgage insurance premium using the FHA streamline
- MIP refund – Homeowners who use the FHA Streamline Refinance may be refunded up to 68% of their prepaid mortgage insurance, in the form of an MIP discount on the new loan
- No appraisal — You can use the FHA Streamline Refinance even if your current mortgage is underwater
- No verification of job or income — You may be eligible for the FHA Streamline even if you recently lost your job or took a pay cut
- No credit check — A low credit score won’t stop you from using the FHA streamline program. This is almost impossible to find with other refinance loans
If you currently have an FHA home loan and you want to refinance into a lower rate, the FHA Streamline should be your first stop. Its benefits are near-unmatched by any other refinance program.Verify your FHA Streamline Refinance eligibility (Sep 21st, 2020)
FHA Streamline Refinance Rates
Today’s average 30-year FHA rate is 2.25% (3.226% APR). But remember, there’s an FHA mortgage insurance fee that adds 0.85% annual interest. This also applies to Streamline refinances. So if you’re considering an FHA Streamline Refinance, now is a good time to capture a base rate below 4% and see bigger savings over the life of your loan.Shop low FHA Streamline Refinance rates here (Sep 21st, 2020)
FHA MIP refund chart
For FHA-backed homeowners refinancing within the 3 years of their existing loan’s start date, the FHA provides a refund on your previously-paid upfront MIP.
The size of the refund diminishes as the 3-year window elapses.
For example, a homeowner who refinances an FHA mortgage after 11 months is granted a 60% refund on his initial FHA UFMIP. 30 days later, the refund drops to 58%. After another 30 days, it drops to 56%, and so on.
|Months After Closing||MIP Refund||Months After Closing||MIP Refund||Months After Closing||MIP Refund|
Note: FHA homeowners are only eligible for the Streamline Refinance program after six months. Thus, eligibility for an MIP refund starts at seven months.
This is why is rarely a good idea to “wait to refinance” with the FHA. With the FHA Streamline Refinance program, the sooner you refinance, the bigger your refund, and the lower your total loan size. This lowers the monthly payment and preserves the home equity — two huge positives.An FHA mortgage insurance refund check accompanies every rate quote. Request that here. (Sep 21st, 2020)
How the FHA streamline works
For the most part, the FHA Streamline works like any other refinance program. It’s available as a fixed rate or adjustable mortgage; it comes as a 15- or 30-year term; and there’s no FHA prepayment penalty to worry about.
The FHA Streamline cannot be used to refinance a 30-year mortgage into a 15-year mortgage. It can, however, be used to extend a 15-year loan into a 30-year. Doing so lowers monthly payments even further for homeowners.
Another big plus is that rates for the FHA Streamline Refinance are the same as mortgage rates for a “regular” FHA loan. There’s no penalty for being underwater, or for having very little equity.
No home appraisal
The biggest difference between the FHA Streamline and most traditional refinance programs is that it doesn’t require a home appraisal.
Instead, the FHA will allow you to use your original purchase price as your home’s current value, regardless of what your home is actually worth today.
The FHA streamline refinance does not require an appraisal, so you can refinance into a lower rate even if you owe more on your loan than the home is currently worth.
In this way, with its FHA Streamline Refinance program, the FHA does not care if you are underwater on your mortgage. Rather, the program encourages underwater mortgages.
Even if you owe twice what your home is now worth, the FHA will refinance your home without added cost or penalty.
The “appraisal waiver” has been a huge hit with U.S. homeowners, allowing unlimited loan-to-value (LTV) home loans via the FHA Streamline Refinance program.Verify your new rate (Sep 21st, 2020)
Another big plus is that the FHA Streamline Refinance is fairly easy for which to qualify.
Earlier this decade, in an effort to help U.S. homeowners, the FHA abolished most of the typical verifications required to get a mortgage. So, today, as it’s written in the FHA’s official mortgage guidelines :
- Employment verification is not required with an FHA Streamline Refinance
- Income verification is not required with an FHA Streamline Refinance
- Credit score verification is not required with an FHA Streamline Refinance
There’s no need for a home appraisal, either, so when you put it all together, you can be (1) out-of-work, (2) without income, (3) carry a terrible credit rating and (4) have no home equity. Yet, you can still be approved for an FHA Streamline Refinance.
That’s not as crazy as it sounds, by the way.
To understand why the FHA Streamline Refinance is a smart program for the FHA, we have to remember that the FHA’s chief role is to insure mortgages — not “make” them.
It’s in the FHA’s best interest to help as many people as possible qualify for today’s low mortgage rates. Lower mortgage rates means lower monthly payments which, in theory, leads to fewer loan defaults.
This is good for homeowners that want lower mortgage rates and for the FHA — but mostly for the FHA.Check today's FHA Streamline Refinance rates here. (Sep 21st, 2020)
Although the FHA Streamline Refinance eschews “traditional” mortgage standards, like income and credit verification, the program does enforce minimum standards for applicants.
- 3 months of on-time mortgage payments
- At least 210 days since your last refinance
- There must be a clear benefit
- Usually you must lower your rate by at least 0.50%
The official FHA Streamline Refinance guidelines are below. Note that not all mortgage lenders will underwrite to the official guidelines of the Federal Housing Administration.
Some lenders might enforce credit score minimums or other limitations for FHA Streamline mortgages.Verify your FHA Streamline eligibility (Sep 21st, 2020)
Perfect, 3-month payment history is required
The FHA’s main goal is to reduce its overall loan pool risk. Therefore, it’s number one qualification standard is that homeowners using the Streamline Refinance program must have a perfect payment history stretching back 3 months. 30-day, 60-day, and 90-day lates are not allowed.
One mortgage late payment is allowed in the last 12 months. Loans must be current at the time of closing.
210-day “waiting period” after buying or refinancing
The FHA requires that borrowers make 6 mortgage payments on their current FHA-insured loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance.
The refinance must have “purpose”
Streamline Refinance applicants must demonstrate that there’s a Net Tangible Benefit in the refinance; a legitimate reason for refinancing.
Loosely, Net Tangible Benefit is defined as reducing the “combined rate” by at least one-half of one percent.
For instance, the homeowner has an FHA loan opened in May 2013 with a rate of 5.00%, and an annual mortgage insurance premium equal to 1.35%. The combined rate is 6.35%.
The homeowner receives a rate quote at 4.75% with MIP of 0.85%. She saves on her rate and mortgage insurance, since FHA MIP was reduced in January 2015.
The new combined rate would be 5.60%, or three-quarters of one percent lower than the existing combined rate. The FHA refinance is eligible.
Another allowable Net Tangible Benefit is to refinance from an adjusting ARM into a fixed rate loan. Taking “cash out” to pay bills is not an allowable Net Tangible Benefit.Click here to check your FHA Streamline Refinance eligibility now. (Sep 21st, 2020)
Employment and income are not verified
The FHA does not require verification of a borrower’s employment or annual income as part of the FHA Streamline process.
There is no Verification of Employment, nor are there paystubs, W-2s or tax returns required for approval.
You can be unemployed and get approved for a FHA Streamline Refinance so long as you still meet the other program requirements.
Credit scores are not verified
The FHA does not verify credit scores as part of the FHA Streamline Refinance program. Instead, it uses payment history as a gauge for future loan performance.
This means that FICO scores below 640, below 620, below 580, and below 500 are eligible for Streamline Refis.
Some lenders, however, create their own minimums. Check your lender’s guidelines before applying.Click here to verify your FHA rate reduction. (Sep 21st, 2020)
Loan balances may not increase to cover loan costs
The FHA prohibits increasing a Streamline Refinance’s loan balance to cover associated loan charges. The new loan balance is limited by the math formula of (Current Principal Balance + Upfront Mortgage Insurance Premium). All other costs — origination charges, title charges, escrow population — must be either (1) Paid by the borrower as cash at closing, or (2) Credited by the loan officer in full.
The latter is called a “zero-cost FHA Streamline”.
You can’t take extra cash when refinancing with an FHA streamline loan. This refinance is mainly for the purpose of dropping your rate and payment.
However, the FHA cash out refinance is another product offered by the FHA. It allows you to open a loan of up to 80% of your home’s value. If that amount is larger than your current loan balance, you take the difference in cash.
Use these funds for any purpose: pay off debt, improve your home, or create an emergency fund.
Appraisals not required
The FHA isn’t concerned about home value — it’s insuring your loan regardless.
Therefore, the FHA does not require appraisals for its Streamline Refinance program. Instead, it uses the original purchase price of your home, or the most recent appraised value, as its valuation point.
Homes that are underwater are still FHA Streamline-eligible.
Should you use the FHA Streamline?
What happens to FHA mortgage insurance if you Streamline Refinance?
Like other FHA loans, the FHA Streamline Refinance requires borrowers to pay mortgage insurance.
Even if you’ve built equity in the home since purchasing it, the FHA Streamline Refinance cannot be used to eliminate mortgage insurance premium (MIP).
FHA borrowers are required to make two types of mortgage insurance payments: an upfront mortgage insurance payment paid at closing, plus an annual payment split into 12 installments, paid with your mortgage payment each month.
- Upfront Mortgage Insurance Premium (UFMIP) = 1.75% of the loan amount for most recent FHA loans and refinances
- Annual Mortgage Insurance Premium (MIP) = 0.85% of the loan amount most recent FHA loans and refinances
With respect to mortgage insurance premiums, homeowners using the FHA Streamline Refinance program are split into two classes:
- Homeowners whose new loan replaces an FHA-backed mortgage endorsed prior to June 1, 2009
- Homeowners whose new loan replaces an FHA-backed mortgage endorsed on/after June 1, 2009.
Homeowners in the first class -— those with “old” FHA mortgages — are assigned different mortgage insurance than newer FHA homeowners.
Specifically, these older FHA mortgage qualify for a reduced upfront premium of just 0.10% of the loan amount, or $10 for every $100,000 borrowed.
Additionally, monthly mortgage insurance is just 0.55% of the loan amount annually, compared to “regular” MIP of 0.85% per year.
FHA Streamline MIP For Loans Endorsed On/After June 1, 2009
If you are refinancing an FHA mortgage via the FHA Streamline Refinance program and your existing FHA mortgage was endorsed on, or after, June 1, 2009, your mortgage insurance premium schedule on your new FHA loan is as follows.
Upfront Mortgage Insurance Premiums (UFMIP)
For an FHA Streamline Refinance replacing a loan endorsed on, or after, June 1, 2009, the FHA upfront mortgage insurance premium is equal to 1.75 percent of your loan size, or 175 basis points.
This is $1,750 for every $100,000 borrowed. The FHA automatically adds the $1,750 premium to your loan balance for you — it’s not paid as cash.
However, not all refinancing households will pay the full amount.
As shown in the chart above, those using an FHA Streamline within 3 years of their original loan stand to get an upfront MIP refund.
This can significantly lower amount of UFMIP added to your new loan, thus reducing the amount you have to pay overall.
Annual Mortgage Insurance Premiums (MIP)
The annual MIP schedule for an FHA Streamline Refinance which replaces a loan from on, or after, June 1, 2009 is as follows :
- 15- & 30-year loan terms with an LTV over 90%: 0.85 percent annual MIP, payable for the life of the loan
- 15- & 30-year loan terms with an LTV under 90%: 0.85 percent annual MIP, payable for 11 years
Note that these MIP costs may be lower than what you’re paying currently.
In January 2015, the FHA lowered its mortgage insurance premiums on 30-year loans, making it less expensive to carry an FHA home.
If your current FHA MIP is higher than what’s shown above, consider starting a refinance immediately to benefit from a new, lower FHA MIP.
FHA Streamline Refinance MIP (For Loans Endorsed Before June 1, 2009)
If your existing FHA mortgage was endorsed prior to June 1, 2009, your mortgage insurance premiums have been “grandfathered”.
You can refinance via the FHA Streamline Refinance program and pay reduced rates for both for upfront MIP and your annual mortgage insurance premium.
Upfront Mortgage Insurance Premiums (UFMIP)
For an FHA Streamline Refinance that replaces a loan endorsed prior to June 1, 2009, the new FHA mortgage’s upfront mortgage insurance is equal to 0.01 percent of the loan size, or 1 basis point.
For example, if your new FHA Streamline Refinance is for $100,000 mortgage, the FHA will assess a $10 upfront mortgage insurance premium (MIP) to be paid at closing. The FHA automatically adds the $10 payment to your new loan balance.
Annual Mortgage Insurance Premiums (MIP)
Annual MIP is similarly cheap for older FHA loans. For an FHA Streamline Refinance replacing an FHA loan endorsed prior to June 1, 2009, the annual MIP is 0.55% annually, or 55 basis points.
The complete annual MIP schedule is as follows :
- 15- & 30-year loan terms with an LTV over 90%: 0.55 percent annual MIP, payable for the life of the loan
- 15- & 30-year loan terms with an LTV under 90%: 0.55 percent annual MIP, payable for 11 years
The FHA requires some homeowners to pay mortgage insurance for as long as their loan is in effect.
If your FHA Streamline Refinance replaces a loan from on, or after, June 1, 2009, the rules on your FHA MIP cancellation are as follows:
- LTV of 90% or less at the time of closing: MIP is required for 11 years
- LTV greater than 90% at the time of closing: MIP required for life of loan
The FHA MIP cancelation policy applies to 15-year loan terms and 30-year loan terms equally.
Note that refinancing homeowners are welcome to bring cash to closing in order to reduce their loan balance and change their MIP disposition. However, not everyone will have the cash to make such a move.
This is why, when exploring an FHA Streamline Refinance, you should also look other refinance programs including the conventional mortgage loan via Fannie Mae or Freddie Mac, which is available with nearly every mortgage lender.
The FHA allows its homeowners to refinance to cancel FHA MIP.
FHA Streamline Refinance FAQ
FHA Streamline is a refinance program that only current FHA homeowners can use. It’s faster and easier than most refinance programs, with no documentation required for income, credit, or home appraisal. An FHA Streamline Refinance can help homeowners lower their annual mortgage insurance premium (MIP) or even get a partial refund of their upfront MIP payment.
The FHA Streamline Refinance resets your mortgage with a lower interest rate and monthly payment. If you have a 30-year FHA mortgage, you can use the FHA Streamline to refinance into a cheaper 30-year loan. 15-year FHA borrowers can refinance into a 15- or 30-year loan. The FHA Streamline does not cancel mortgage insurance premium (MIP) for those who pay it. But annual MIP rates may go down, depending on when the loan was originated.
The borrower has to pay closing costs on an FHA Streamline Refinance. Unlike other types of refinances, you cannot roll them into your loan amount. FHA Streamline closing costs are typically the same as other mortgages: 2-5% of the loan amount, or $3,000 to $7,500 on a $150,000 loan. The only difference is, you don’t have to pay for an appraisal on an FHA Streamline. That could save you around $500-$1,000 at closing.
No, the FHA Streamline Refinance does not get rid of mortgage insurance. Refinanced FHA loans still have annual mortgage insurance, as well as a new upfront mortgage insurance fee equal to 1.75% of the loan amount. The upfront fee is added to your loan amount. However, if you use the FHA Streamline Refinance within 3 years of opening your loan, you’ll be refunded part of your original UFMIP fee — thus lowering the total loan amount.
To qualify for an FHA Streamline Refinance, your current home loan must be insured by the FHA. If you’re not sure whether it is, ask your lender. FHA also requires three months of on-time payments, and a 210-day waiting period since the last closing date (either purchase or refinance). Finally, the FHA Streamline Refinance must have a “purpose.” That usually means the refinance needs to lower your combined interest and insurance rate by at least 0.50%.
Technically, the FHA Streamline does not require a credit check. That means homeowners could potentially use the Streamline Refinance even if their credit score has fallen below the 580 threshold for FHA loans. However, some lenders may require a credit check anyway. So if your credit is on the lower end, be sure to shop around.
No, you cannot take cash out on an FHA Streamline Refinance.
The FHA Streamline Refinance is a “low-doc” refinance loan; it requires less paperwork than most other mortgages. But there’s still some documentation required. For an FHA Streamline Refinance, you’ll still need:
– A loan application
– A current mortgage statement showing a 6 month payment history
– Contact information for your employer (the lender may verify employment, but not income)
– Two months’ worth of bank statements showing you can cover out-of-pocket closing costs
– Utility bills showing you use the home as a primary residence
FHA homeowners are eligible for a Streamline Refinance 210 days after their last closing. That means you must have made 6 consecutive mortgage payments since you purchased or last refinanced the home.
Yes, you can use the FHA Streamline Refinance more than once. You just need to meet FHA’s guidelines — meaning it’s been at least 210 days since your last refinance, you’ve made your last three payments on time, and you can lower your rate around 0.50%.
The big benefit of an FHA Streamline Refinance is that you can switch your FHA loan to a lower rate and monthly payment with minimal hassle. Streamline Refinances have limited documentation, so the process is easier and usually quicker. Another benefit of the FHA Streamline is that there’s no home appraisal – so you can refinance into a lower FHA mortgage rate even if you have very little equity or your loan is underwater.
The FHA Streamline Refinance is probably worth it if you can lower your mortgage rate and monthly payment a significant amount. It’s an especially good deal for homeowners who purchased or refinanced from 2010-2015, because FHA has since lowered its annual mortgage insurance rates. By refinancing a pre-2015 mortgage with the FHA streamline, you may be able to drop your annual mortgage insurance rate from over 1% to just 0.85%.
FHA mortgage insurance premium (MIP) lasts 11 years — if you made a down payment of 10 percent or more — or the full life of the loan if your down payment was less than 10 percent.
The only way to get rid of FHA mortgage insurance is my refinancing your current FHA loan into a conventional loan without PMI. To do this, you’ll need at least 20% equity in your home and a credit score of at least 620 or higher.
What are today’s FHA Streamline rates?
FHA mortgage rates are low and homeowners typically close in less than 30 days. Remember: the faster you close, the bigger your FHA MIP refund.
Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click here for up-to-the-minute FHA streamline refinance rates now. (Sep 21st, 2020)
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