FHA Streamline Refinance Home Mortgage Information
FHA has permitted streamline refinances on insured mortgages since the early 1980's. The "streamline" refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved although the costs that are involved are usually substantially lower. The basic requirements of a streamline refinance are:
- The mortgage must already have FHA insurance.
- The mortgage being refinanced must be current.
- The refinance must lower the borrower's monthly principal and interest payment.
- No cash may bet taken out on mortgages refinanced using the streamline refinance process.
Lenders may offer streamline refinances in several ways. Some lenders offer "no cost" refinances (actually, no out-of-pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the lender pays any closing costs that are incurred on the transaction.
Lenders may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by an appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed the original loan amount. This means that while you will not have to pay for a new appraisal, any closing costs associated with the loan may not be incorporated into the loan and therefore have to paid "out of pocket."
