Updated January 2018
The FHA streamline refinance loan program is designed for people who currently have an FHA loan to be able to refinance with reduced paperwork and still get a lower interest rate than they currently may have. Typically, an FHA streamline refinance is easier to qualify for than a regular FHA loan (due to the reduced documentation requirements).
FHA Streamline General Requirements
While FHA has a set of guidelines for the FHA streamline program, at any point in time, any particular lender may have adopted “overlays.” This is a fancy word for “additional requirements”.
For example, FHA may have a minimum credit score of 580 in order to qualify for the program, but a lender may require a minimum of 640 in order for them to fund your loan.
That being said, here is a list of general requirements for the FHA streamline program:
- No appraisal required
- No income calculations or debt to income calculations required
- No minimum credit scores required
- Reduced lender fees
- Streamlined paperwork process
FHA Streamline Rates
FHA streamline rates are moving all the time – just like every other mortgage rate. Lenders will typically change their rate once per day although sometimes they will announce changes throughout the day.
Whatever rate you are first quoted is most likely not the rate that you will get, though – the rate you will get is the rate that you agree to when you lock your loan.
FHA UFMIP and MIP
Source: HUD Mortgagee Letter 2017-07
The Net Tangible Benefit Test
When doing an FHA streamline, your lender will perform a “net tangible benefit test” which basically means they will make sure that the streamline refinance is something that is benefitting you and not putting you in a worse financial position.
The exact wording for the net tangible benefit test outlined in the HUD guidelines section 4155.1 Chapter 6, Section C, FHA rules state that although certain exceptions are permitted, generally speaking:
“The lender must determine that there is a net tangible benefit to the borrower as a result of the streamline refinance transaction, with or without an appraisal. The net tangible benefit is defined as:
- A 5% reduction to the principal and interest (P&I) of the mortgage payment plus the annual mortgage insurance premium (MIP), or
- Refinancing from an Adjustable Rate Mortgage (ARM) to a fixed rate mortgage.”
It goes on to state:
“To qualify as a net tangible benefit, the new mortgage payment (P&I plus MIP) must be at least 5% lower (emphasis ours) than the mortgage payment of the loan being refinanced. This requirement applies when refinancing from
- fixed rate to fixed rate
- ARM to ARM
- Graduated Payment Mortgage (GPM) to ARM
- GPM to fixed rate
- 203(k) to 203(b), and
- 235 to 203(b)”
This means that just a reduction in the loan term is not reason enough alone for a net tangible benefit – so if you have more questions about this, be sure to ask your loan officer.
FHA Streamline Free Quotes
Getting a quote for the FHA streamline from an approved FHA lender is easy and free to get started. FHA approved lenders can easily help you get a free FHA streamline quote that will let you know how much money you could possibly save and whether or not it makes sense to participate in the FHA streamline program.Ask our lenders about your mortgage options today.