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FHA Refinance Streamline with No Costs Staff - Mortgage Lenders Plus.com

FHA has provided what they call “streamline” refinances on insured mortgages since the early 1980's. The "streamline" refers to the amount of documentation and underwriting that needs to be performed by the lender. These loans are for the sole purpose of lowering interest rates and payments, and are not designed for equity cash-out.

The basic requirements of a streamline refinance are:

• The mortgage to be refinanced must already be FHA insured.
• The mortgage to be refinanced should be current (not delinquent).
• The refinance must result in a lowering of the borrower's monthly principal and interest payments.
• No cash may be 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. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal

You can refinance an FHA insured loan through a commercial lender, and use the new mortgage to realize some cash through equity. This loan would be subject to the standard lender’s fee structure and interest rate however, and would not fall under the “streamline” guidelines that make the FHA sponsored process relatively simple and efficient.

All FHA insured loans are known as “conforming loans;” that is, they fall below the FHA mark for acceptable loan size for government insurance and purchase. Larger loans are known as “Jumbo” loans and are subject to higher interest rates and private sale and insurance. So refinancing an FHA loan for cash out purchases should be cheaper than for a jumbo loan; going through the “streamline” process just to get a cheaper loan or money for home improvements should be cheaper yet.