Refinancing can be a tedious, time-consuming process -- unless you're using an FHA streamline. The FHA streamline refinancing program offers a quick, easy way to adjust your existing FHA loan's rate or term (or both), without a lot of paperwork. In many cases, you don't even need a credit check.
Are you looking for a way to refinance your existing FHA mortgage? Here's what you need to know about the FHA streamline refinance loan.
What is an FHA streamline refinance?
An FHA streamline refinance is a type of FHA-to-FHA refinance. It doesn't require an appraisal (the FHA already has one on file), the documentation requirements are limited, and you might not need a credit check, either.
There are two types of FHA streamline refinance options:
- Credit qualifying: This means a credit check is required. An FHA streamline refinance is only "credit-qualifying" when it increases your mortgage payment at least 20%, you've had the loan less than six months, or you're removing or adding a borrower to the loan.
- Non-credit qualifying: Most FHA streamline refinances reduce your rate or payment. For loans that fall into this category, no credit check is required.
Most streamline refinances do come with closing costs, though some lenders may offer no-cost options. In these scenarios the lender will pay the closing costs and the borrower will pay a higher interest rate to make up for it.
Pros and cons of FHA streamline refinancing
The benefits of using the FHA streamline refinance program are pretty major. There's little documentation required, your credit and income usually don't need to be verified, and you can speed through that closing easily and efficiently. You might even get a refund on your mortgage insurance premiums (MIPs), depending on how long you've had the loan.
The biggest drawback is that you're still using an FHA loan, which means paying mortgage insurance upfront and every month you have the home. In most cases, MIP is not cancelable on FHA loans.
You also can't take cash out with an FHA streamline refinance. If you're looking to extract cash from your equity, you'll need to pursue a more traditional refinance (and submit all the documentation that comes with it).
Here's a look at the pros and cons of an FHA streamline: