Is there a conventional Streamline Refinance?
The short answer is, no. Conventional loans do not have the same Streamline Refinance option that FHA, VA, or USDA loans do.
But homeowners with conventional mortgages have access to a wide array of other refinance options — many of which offer benefits similar to a Streamline Refinance.
With a little knowledge you can likely get the perks of a Streamline refi without actually using one. Here’s how.
In this article (Skip to...)
- What is a Streamline Refinance?
- Conventional loan refinancing
- ’Streamlined’ conventional refi
- High-LTV refinancing
- Low-credit refinancing
- Cash-out refinance options
- Refinancing while unemployed
- Options for veterans
- The best conventional refinance
What is the Streamline Refinance program?
The Streamline Refinance is a special refi program that involves limited credit underwriting and documentation.
With less red tape required, the refi process can happen more quickly and often more affordably (although refinance closing costs still apply).
“There’s minimal paperwork compared to a traditional refinance and often no appraisal requirement involved for automatically underwritten loans,” says Brian Martucci, a loan expert with Money Crashers.
“For these reasons, streamline refis are a good fit for borrowers who want to refinance quickly and reduce their interest rate or total payment, or switch from an adjustable-rate loan to a more stable fixed-rate loan,” he explains.
Thanks to the lenient documentation for a Streamline refi, some borrowers can even qualify with:
- Reduced credit scores
- Reduced income
- High loan-to-value ratios (LTVs)
This can help borrowers who wouldn’t otherwise qualify refinance into a lower rate and monthly mortgage payment.
“A good candidate for a streamline refi is a borrower who has paid their mortgage on time, with no late payments, no liens on the property, and a home with a value that is higher than when it was initially purchased,” says Darrin English, senior community development loan officer for Quontic Bank.
But there’s a catch.
Streamline Refinance options are only available to homeowners with government-backed FHA, VA, or USDA loans. That means homeowners with conventional loans aren’t eligible.
So what are your options?
Conventional refinance options
Unfortunately, there’s currently no Streamline program for a conventional loan.
“If you are considering a refinance and have a conventional mortgage, you should expect to have to qualify through a full documentation approval process with underwriting,” explains Donny Schulze, a loan officer with Embrace Home Loans.
But that doesn’t mean your options are limited.
In fact, borrowers with conventional loans have access to a wide range of refinance loan programs.
With a little know-how, some of these alternative programs can be used to generate the same benefits as a Streamline refi.
Here are some of the best programs to explore as a conventional homeowner, depending on your refinance goals.
’Streamlined’ conventional refinance options
Maybe you’re considering a Streamlined Refinance because you want a faster way to lower your current mortgage payment.
While they aren’t technically equivalent to a Streamline refi, there are alternatives you can explore that may speed up the process or help you lower your payments more affordably.
- Receive a waiver on your home appraisal if you have a Fannie Mae or Freddie Mac loan. “Some lenders will allow refinance applicants to skip paying for an appraisal when using an automated valuation model, which gives the lender values based upon recent comparable real estate sales,” notes English. However, receiving an appraisal waiver is unpredictable and based on a computerized system from Fannie Mae or Freddie Mac. So it’s difficult for the lender to grant a waiver if the system decides you need an appraisal. But if you are lucky, you can save anywhere from a few hundred to over $1,000 at closing
- Pursue a mortgage recast. Recasting your mortgage involves paying a large lump sum toward the loan balance. This can lower your loan amount and monthly payment without the cost or hassle of a refinance
- Cancel PMI without refinancing. Eliminating private mortgage insurance (PMI) can save you hundreds on your monthly payment, and you don’t need to refinance to do it. PMI should automatically be removed once you reach 78% home equity. But you can ask your existing loan servicer to remove it earlier — once the loan reaches 80% LTV or lower
Any of these methods can help reduce your mortgage payments without going through the full refinance process.
And there are ways to reduce time and cost even with a full refinance.
“There are many scenarios where a refinance application could be eligible for an appraisal waiver on your home,” Schulze says.
“Most lenders have also made the application process much easier by offering online applications, e-sign applications, and making much of the process occur remotely for the borrower.”
High LTV? Use Fannie Mae's HIRO or FMERR
Some borrowers seek a Streamlined Refinance because their loan-to-value ratio (LTV) is too high to qualify for a traditional refinance.
If your LTV is above 97% or your home is ‘underwater’ (meaning you owe more on your loan than the home is worth) you’d normally be ineligible for a conventional refinance.
But today’s homeowners have options.
For those with existing Fannie Mae mortgages, look at the Fannie Mae High LTV Refinance Option (HIRO).
“This is a program that was released to help homeowners who don’t have enough equity in their home to qualify for a traditional conventional refinance,” Schulze explains.
To qualify, he says:
- “Your mortgage must be securitized by Fannie Mae and closed prior to October 1, 2017
- The loan has to be seasoned with 15 monthly payments before you are eligible
- You must meet standard income and credit requirements
- And the lender must document a net tangible benefit to the refinance that meets the program’s guidelines”
If you are eligible, a HIRO refi can allow you to refinance a loan up to any LTV, as long as it is over 97.01 percent of your home’s value.
For example, you purchased a home and now have a loan balance of $250,000. The home has dropped in value and is only worth $225,000. You are eligible for HIRO even though you have a 111% LTV.
“This could be a huge problem-solver for people who are underwater in their home and looking to refinance their mortgage to save money in the hopes that they will gain more equity as time goes by,” says Realtor Jason Gelios.
There’s also the Freddie Mac Enhanced Relief Refinance Mortgage (FMERR) that allows eligible Freddie Mac mortgage borrowers to refinance to an LTV ratio that has no limit—provided you’ve made timely payments.
This option was originally set to expire on September 30, 2019, but has been extended. There is currently no expiration date.
Credit issues? Consider an FHA refinance
As mentioned, the FHA Streamline program doesn’t require a credit check.
This might sound attractive to conventional borrowers whose FICO scores have fallen below the 620 minimum for a conventional refi.
In addition, the Federal Housing Administration has lenient LTV and debt-to-income (DTI) requirements for borrowers.
“All these features are attractive to credit-impaired borrowers and those with limited income, high LTV ratios, and other financial limitations that might preclude a conventional refinance,” Martucci notes.
The good news? Homeowners with existing conventional loans can refinance into an FHA loan.
It won’t be an FHA Streamline Refinance, but you can still benefit from looser credit and income underwriting.
And, FHA mortgage rates are typically near or below those for conventional mortgages.
But there’s a downside, too.
The biggest disadvantage is that your new loan will carry mortgage insurance. FHA mortgage insurance premium (MIP) includes:
- An upfront mortgage insurance premium (UFMIP) equal to 1.75% of the loan amount (this can be rolled into the loan)
- Ongoing annual premiums typically equal to 0.85% of the loan amount, broken into monthly mortgage insurance payments
“Also, this program doesn’t allow you to wrap in your closing costs. So you’ll either need to bring funds to closing or take a credit from the lender at a slightly higher interest rate,” cautions Schulze.
Still, for a conventional borrower with a high interest rate and fair or low credit, an FHA refinance could be a good way to save money.
Want cash-out? Use a conventional refinance
A conventional cash-out refinance is typically your best bet when you want to tap your home equity.
English recommends this strategy when you’ll finance less than 70% of your home value. “You’ll have the ability to access equity by way of cash out and avoid the need for mortgage insurance,” he says.
The cash you withdraw can be used for home improvements, debt consolidation, or any other purpose.
However, a streamlined conventional cash-out refinance is not available.
That means you should expect to go through a full income, credit, asset, and value review by your mortgage lender to get approved.
“It really depends on your current financial position and goals as to whether or not a conventional cash-out refi is the right move,” says Schulze.
“There are situations where this option might put you in a less favorable position than with your current loan. For example, it may result in a higher interest rate and monthly payment or a longer repayment term.”
“In these situations,” Schulze continues, “you might want to pursue a home equity line of credit instead.”
Employment/income issues? Now might not be the time to refi
Be forewarned: If you are recently unemployed or have experienced a decrease in earnings, you’ll likely not qualify for a mortgage refinance.
“You must return to work and present at least one full-time paystub before being eligible to refinance, in most cases,” says English.
He also notes, “A lower income may be insufficient to support your monthly payment. Most programs will allow a maximum debt-to-income ratio of 49 percent.”
“Ideally, you should wait until you have been employed for six months or longer before applying for a refinance,” he says.
“And if you are freelancing or doing gig work while looking for full-time employment, note that lenders tend to be more skeptical of self-employment income.”
This is especially true during the coronavirus pandemic, with many industries less stable and employment less certain.
You can learn more about refinancing or buying a home after being unemployed here.
An option for vets and military members
If you’re a veteran or service member with a conventional loan, you should look into refinancing into a VA loan.
Since your existing loan is not VA-backed, you won’t be able to use the VA Streamline Refinance (IRRRL). However, you will get to take advantage of the other benefits this type of financing can offer.
Benefits of a VA loan include:
- Exceptionally low VA mortgage rates
- No continuing mortgage insurance
- Only a one-time funding fee
- No home equity required to refinance
- Limited closing costs
- Access to the IRRRL program in the future
Refinancing into a VA loan will typically get you a lower interest rate than refinancing into a new conventional loan. So this is a great option for those who are VA-eligible.
The best conventional loan refinancing options
So what’s the best conventional loan refinance option for you? That will depend on your financial circumstances, your existing loan, and the loan offer you are given.
“A traditional refi is often the best bet for borrowers with an LTV under 70 percent who want to get the lowest possible interest rate,” suggests Martucci.
“A cash-out refi makes more sense for borrowers who want to tap their home’s equity to finance renovations or other major purchases. But cash-out refis typically have higher interest rates than traditional refis.”
If you are underwater on your home or have a high LTV ratio, “a Fannie Mae HIRO refinance remains your best bet,” he adds.
The best way to determine which option is right for you is to have a conversation with an experienced and trusted mortgage professional and review detailed refinance plans, recommends Schulze.
You should also shop with 3 or more lenders to make sure you’re getting the best interest rate available in today’s market.