A streamline refinance is a refinance for borrowers who currently have an FHA loan. The documentation that is required for a streamline refinance is limited compared to a regular refinance. Using this type of loan to refinance does not mean there will be no closing costs. Closing costs still apply, however they may be lower than your standard refinance since you do not need an appraisal or credit report on certain programs. The basic guidelines to be eligible for an FHA streamline refinance are:
1. You must currently have an FHA insured loan on your home.
2. You must be current on your mortgage payment.
3. The streamline refinance must lower the borrower’s current principle and interest payment_ unless the borrower refinances into a shorter term loan, then the P&I payment can not go up more than 20%.
4. No cash may be taken out on a streamline refinance.
FHA will require verification of employment, but not income verification. No tax returns, W-2's or paystubs required. Also, a credit report is not required.
An appraisal is required only if the borrower is rolling the closing costs into the loan. If the borrower decides on a No-Cost streamline refinance which is available, or pays the closing costs out of pocket, then no appraisal is required. If the borrower decides to roll the closing costs into the loan, an appraisal is required and there are maximum Loan to Value requirements on the new loan.
If you have a 2nd Trust Deed on your property and you are not paying that loan off with your refinance, the current lender on the 2nd Trust Deed must agree to subordinate to the new first FHA loan.
This Streamline Refinance FHA loan is perfect for the borrower that is in good standing on their current loan, but has a high interest rate and would like to refinance to lower their payment. FHA's streamline refinance_ allows borrowers to refinance their current mortgage with less documentation than_ a regular refinance loan. Since an appraisal is not required _in most cases_, this is an excellent loan for borrowers that do not have a lot of equity. It’s also a great loan for people who pay their mortgage on time but don’t have good credit otherwise.
