The FHA Streamline Refinance
If you currently have an FHA mortgage, the FHA Streamline Refinance is the easiest way to get a lower rate and monthly payment.
The FHA Streamline is a “low-doc” refinance with limited paperwork required. The lender doesn’t have to verify your income or credit, and there’s no home appraisal.
That means a Streamline Refinance closes faster than other loans and has slightly cheaper closing costs.
Thanks to the FHA Streamline, borrowers with FHA loans have easier access to today’s low rates than most other homeowners.
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What is the FHA Streamline Refinance loan?
The FHA Streamline is a special refinance program reserved for homeowners with existing FHA mortgages. An FHA Streamline is the fastest, simplest way for FHA-insured homeowners to refinance their mortgages at today’s low mortgage rates.
Benefits of the FHA Streamline program include:
- Low refinance rates — FHA loan rates currently average 2.5% (3.478% APR). This is an incredibly low rate compared to most of the mortgage industry
- Lower MIP rates — If you got an FHA loan between 2010 and 2015, you can access today’s lower annual mortgage insurance premiums using FHA streamline refinancing
- MIP refund — Homeowners who use the FHA Streamline Refinance may be refunded up to 68 percent of their prepaid mortgage insurance, in the form of an MIP discount on the new loan
- No appraisal — You could use the FHA Streamline Refinance even if your current mortgage is underwater
- No verification of job or income — You may be eligible for FHA Streamline refinancing even if you recently lost your job or took a pay cut
- No credit check — A low credit score won’t stop you from using the FHA Streamline’s non-credit qualifying option. This is almost impossible to find with other refinance loans
If you have an existing FHA loan and you want to refinance into a lower interest rate, the FHA Streamline should be your first stop. Its benefits are nearly unmatched by any other refinance option.
FHA Streamline Refinance Rates
Today’s average 30-year FHA rate is 2.5% (3% APR) according to our lender network. But remember, the FHA mortgage insurance fee adds 0.85% in annual costs. This also applies to Streamline Refinances.
|30-Year FHA Fixed Rate||2.5% (3% APR)|
|15-Year FHA Fixed Rate||2.5% (2.5% APR)|
|30-Year Conventional Rate||3% (3% APR)|
|15-Year Conventional Rate||2.5% (2.5% APR)|
Interest rates are for example purposes only. Your own rate will vary. See our rate assumption here.
If you’re considering an FHA Streamline Refinance, now is a good time to lock in a low base rate and see bigger savings over the life of your loan.
How the FHA streamline works
For the most part, the FHA Streamline works like any other refinance product. You take out a new FHA mortgage — typically with a better interest rate and lower monthly payment — which replaces your existing loan. Your current mortgage must be FHA-backed to use this program.
The FHA Streamline is available as a fixed-rate or adjustable-rate mortgage; it comes with a 15- or 30-year term; and there’s no FHA prepayment penalty to worry about.
Note, the FHA Streamline cannot be used to refinance a 30-year mortgage into a 15-year mortgage.
It can, however, be used to extend a 15-year loan into a 30-year loan. Doing this lowers monthly payments even further for homeowners. But it also stretches out your interest payments, which means you could pay more with the longer term.
Another big plus is that rates for the FHA Streamline Refinance are the same as FHA home purchase rates. There’s no penalty for being underwater, or for having very little equity.
FHA Streamline Refinance pros & cons
|FHA Streamline Refinance Pros||FHA Streamline Refinance Cons|
|Easy to qualify, especially with non-credit qualifying option||No cash-back allowed|
|Access today’s lower interest rates||Some lenders have stricter rules (so shop around!)|
|Lower MIP rates for some borrowers||You can’t shorten your loan term|
|No home appraisal necessary||Closing costs can’t be rolled into the loan balance|
Two types of FHA Streamline Refinance loans
The Federal Housing Administration offers two different Streamline Refinance options:
- Credit Qualifying Streamline Refinance — Lenders will check your credit score and debt-to-income ratio to see whether you’d be able to make the loan’s payments
- Non-Credit Qualifying Streamline Refinance — Lenders can approve this refinance without checking your credit score or verifying your income
Why would anyone choose the credit qualifying option and go through the full underwriting process?
Well, there are times when credit qualifying is necessary — like when you’re adding a new co-borrower to the loan or removing an existing co-borrower.
In other cases, qualifying for the loan all over again could save you money. If your credit profile has improved a lot since you got your original loan, you might qualify for an even better interest rate, for example.
What documents do I need for an FHA Streamline Refinance?
The FHA Streamline Refinance is a “low-doc” refinance loan, meaning it requires less paperwork than most other mortgages. But you’ll still need some documentation, including:
- A loan application
- A current mortgage statement showing a six month payment history
- Contact information for your employer (the lender may verify employment, but not income)
- Two months’ worth of bank statements showing you can cover out-of-pocket closing costs
- Utility bills showing you use the home as a primary residence
If you use the FHA’s credit-qualifying Streamline Refinance, you will need to “re-qualify” with your income and credit score. This option would be required if you’re removing a co-borrower from the loan.
FHA Streamline benefits
We’ve already mentioned that the FHA Streamline can lower your rate and mortgage payments. But there are other benefits with this refinance program, too. For example:
- There’s no home appraisal required
- Very little documentation is required
- You could get a partial MIP refund
Let’s dig into each of those a little further.
No home appraisal
The biggest difference between the FHA Streamline and most traditional mortgage refinance options is that the FHA Streamline doesn’t require a home appraisal.
Instead, the FHA will allow you to use your original purchase price as your home’s current value, regardless of what your home is actually worth today.
In this way, with its FHA Streamline Refinance program, the FHA does not care if you are underwater on your mortgage.
Rather, the program encourages underwater refinancing.
Even if you owed twice what your home is now worth, FHA may allow you to refinance your home without added cost or penalty.
The “appraisal waiver” has been a huge hit with U.S. homeowners, allowing unlimited loan-to-value (LTV) home loans via the FHA Streamline Refinance program.
Another big plus: It’s fairly easy to get an FHA Streamline Refinance loan, especially the non-credit qualifying type.
The non-credit qualifying Streamline Refinance does not require most of the typical verifications you’d need to get a new mortgage.
As it’s written in the FHA’s official mortgage guidelines:
- Employment verification is not required with an FHA Streamline Refinance
- Income verification is not required with an FHA Streamline Refinance
- Credit score verification is not required with an FHA Streamline Refinance (though most lenders will check credit)
When you put it all together, you can:
- Be out-of-work
- Have no income
- Have a shaky credit report
- Have no home equity
Yet, you could still be approved for an FHA Streamline Refinance’s non-credit qualifying option.
That’s not as crazy as it sounds, by the way.
To understand why the FHA Streamline Refinance is a smart program for the FHA, we have to remember the FHA’s chief role is to insure mortgages — not “make” them.
It’s in the FHA’s best interest to help as many people as possible qualify for today’s low mortgage rates. Lower mortgage rates mean lower monthly payments which, in theory, leads to fewer loan defaults.
This is good for homeowners who want lower mortgage rates, and it’s good for the FHA. With fewer loan defaults, the FHA has to pay fewer insurance claims to lenders.
In short, the FHA is helping itself when it helps you. Which is why the requirements for the Streamline refi are so simple.
FHA MIP refund
There’s an additional benefit for FHA-backed homeowners refinancing within the first three years of their existing loan origination.
The FHA provides a partial refund on the upfront mortgage insurance premium (UFMIP) you paid when you first got your FHA loan.
The size of the refund diminishes as the three-year window elapses.
For example, a homeowner who refinances an FHA mortgage after 11 months is granted a 60 percent refund on their initial FHA UFMIP.
Thirty days later, the refund drops to 58 percent. After another 30 days, it drops to 56 percent, and so on.
|Months After Closing||MIP Refund||Months After Closing||MIP Refund||Months After Closing||MIP Refund|
Note: FHA homeowners are only eligible for the Streamline Refinance program after six months. Thus, eligibility for an MIP refund starts at seven months.
This is why it’s rarely a good idea to “wait to refinance” an FHA loan.
With the FHA Streamline Refinance program, the sooner you refinance, the bigger your refund, and the lower your total loan size for your new mortgage.
This lowers the monthly payment and preserves the home equity — two huge positives.
Are you eligible for an FHA Streamline Refinance?
Although the FHA Streamline Refinance bypasses “traditional” mortgage standards, like income verification and credit qualifying, the program does enforce minimum standards for applicants.
You’ll need to show:
- Three months of on-time mortgage payments
- At least 210 days since your home purchase or last refinance
- A clear monetary benefit to refinancing
- That you can lower your interest rate by at least 0.50% in most cases
The official FHA Streamline Refinance guidelines are below. Note that not all mortgage lenders will underwrite to the official guidelines of the Federal Housing Administration.
Some lenders might enforce credit score minimums or other underwriting standards for FHA Streamline mortgages.
If your current lender is requiring a home appraisal or income verification, you’re free to shop around for a more lenient lender that adheres to the FHA’s minimum guidelines for Streamline refinancing.
Perfect, 3-month payment history is required
The FHA’s main goal is to reduce its overall loan pool risk. Therefore, its number one qualification standard is that homeowners using the Streamline Refinance program must have a perfect payment history stretching back at least three months.
Homeowners with 30-day, 60-day, and 90-day late payments are not allowed to use this refinancing option.
One late mortgage payment is allowed in the last 12 months. Loans must be current at the time of closing.
210-day “waiting period” after buying or refinancing
The FHA requires that borrowers make six mortgage payments on their current FHA-insured loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance.
The refinance must have “purpose”
Streamline Refinance applicants must demonstrate a ‘Net Tangible Benefit’ from the refinance — meaning there will be a clear monetary benefit to the new loan.
Loosely, Net Tangible Benefit is defined as reducing the “combined rate” by at least one-half of one percent.
For instance, say a homeowner has an FHA loan opened in May 2019 with a rate of 4.00%, and an annual mortgage insurance premium equal to 0.85 percent of the mortgage amount.
The combined rate is 4.85%.
The homeowner looks into a Streamline Refinance, and receives a rate quote at 3.25% with MIP of 0.85 percent.
The new combined rate would be 4.1%, or three-quarters of one percent lower than the existing combined rate. This FHA refinance would be eligible.
Another allowable Net Tangible Benefit is to refinance from an adjustable-rate mortgage to a fixed-rate mortgage.
This is considered a benefit because fixed-rate mortgages have predictable rates and payments that carry less risk of default.
Taking cash out of your equity is not an allowable Net Tangible Benefit, but the FHA does have a cash-out refinance loan that we’ll discuss below.
Employment and income are not verified
The FHA does not require verification of a borrower’s employment or annual income as part of the FHA Streamline process, unless the borrower needs a credit qualifying loan.
For non-credit qualifying Streamline loans, there is no verification of employment, nor are there paystubs, W-2s or tax returns required for approval.
Credit scores are not verified
The FHA does not verify credit scores as part of the FHA Streamline Refinance program, unless you need the credit qualifying option. Instead, it uses payment history as a gauge for future loan performance.
This means that FICO scores below 640, below 620, below 580, and even below 500 could be eligible for Streamline Refis.
Some lenders, however, create their own minimum requirements. Check your lender’s credit qualifying guidelines before applying.
Loan balances may not increase to cover loan costs
FHA does not allow you to roll closing costs into your new loan balance on an FHA Streamline Refinance.
The maximum mortgage amount on your new loan is equal to your current principal balance plus your upfront mortgage insurance premium.
All other costs — including origination charges, title charges, and prepaid taxes and insurance — must be either paid by the borrower as cash at closing, or credited by the loan officer in full.
The latter is called a “no-cost FHA Streamline.” Using this option, your lender covers the closing costs. But you pay a higher interest rate in exchange. So you’ll ultimately pay more over the life of the loan.
You can’t take extra cash out when refinancing with an FHA Streamline loan. This refinance is designed mainly to lower the homeowner’s interest rate and payment.
However, the FHA cash-out refinance is another refinancing option offered by the FHA.
It allows you to open a loan of up to 80 percent of your home’s value. If that amount is larger than your current loan balance, you take the difference in cash.
Homeowners can use these funds for any purpose: to pay off debt, improve your home, or create an emergency fund.
Should you use the FHA Streamline?
What happens to FHA mortgage insurance if you use the Streamline Refinance?
Like other FHA loans, the FHA Streamline Refinance requires borrowers to pay mortgage insurance.
Even if you’ve built equity in the home since purchasing it, the FHA Streamline Refinance cannot be used to eliminate mortgage insurance premium (MIP).
FHA borrowers are required to make two types of mortgage insurance payments:
- Upfront Mortgage Insurance Premium (UFMIP) = 1.75% of the loan amount added to your loan (not due as cash at closing)
- Annual Mortgage Insurance Premium (MIP) = 0.85% of the loan amount split into 12 installments, which are paid with your mortgage each month
This is true for Streamline Refinance loans as well as purchase loans.
Upfront Mortgage Insurance Premium (UFMIP)
Not all refinancing households will pay the full amount of upfront MIP.
As shown in the chart above, those using an FHA Streamline within three years of their original loan stand to get an upfront MIP refund.
This can significantly lower the amount of UFMIP added to your new loan and reduce the amount you have to pay overall.
Annual Mortgage Insurance Premium (MIP)
The annual MIP cost for an FHA Streamline Refinance is as follows:
- 15- & 30-year loan terms with an LTV over 90 percent: 0.85% annual MIP, payable for the life of the loan
- 15- & 30-year loan terms with an LTV under 90 percent: 0.85% annual MIP, payable for 11 years
If you got your existing FHA loan before January 2015, when MIP rates were higher, you could lower your MIP rate with a Streamline Refinance.
The FHA’s MIP rules have changed a lot over the years, and the age of your loan will help determine how much you could save.
If your current FHA MIP is higher than what’s shown above, consider starting a refinance immediately to benefit from a new, lower FHA MIP.
FHA MIP Cancellation Policy
The FHA requires most homeowners to pay mortgage insurance for the life of the loan.
Only homeowners with a starting loan-to-value ratio of 90 percent or less can cancel mortgage insurance after 11 years. (An LTV of 90 percent or less means you made at least a 10% down payment.)
Refinancing homeowners could also bring cash to closing to reduce their loan balance and change their MIP disposition. However, not everyone will have the cash to make such a move.
This is why, when exploring an FHA Streamline Refinance, you should also look at other mortgage refinance options including conventional mortgage loans via Fannie Mae or Freddie Mac.
If you can qualify for a low rate, conventional loans have a big plus: You can cancel private mortgage insurance (PMI) once your loan-to-value ratio falls below 80 percent.
The FHA allows its homeowners to refinance to a conventional loan to cancel FHA MIP.
FHA Streamline vs FHA Cash-Out Refinance
Compared to FHA Streamline Refinance loans, the FHA’s cash-out refinance has an obvious benefit: you can use it to access cash from your home equity.
Say, for example, that you owe $250,000 on your current loan but your home is worth $350,000. The difference between these two numbers — $100,000 — is your home equity.
With a cash-out loan, you could access part of this equity while also refinancing your entire mortgage. Your loan amount would increase as a result.
With a Streamline Refinance, your loan amount cannot increase to generate cash back, even if you do have the equity to back a larger loan.
If you’re considering a cash-out refinance instead of a Streamline loan, know that:
- You’ll need to qualify with your debt, income, and credit score
- You’ll need a new home appraisal to verify your home’s value
- You can refinance any type of mortgage, not just an FHA loan
- Your loan amount will increase so your annual MIP will, too
- You won’t be able to access all your equity — only up to 80%
- Your mortgage rate could increase since cash-out loans are riskier
A Streamline loan is designed for simplicity, so it can dodge most of the additional steps cash-out loans require.
FHA Streamline Refinance FAQ
The FHA Streamline is a refinance program that only current FHA homeowners can use. It’s faster and easier than most refinance programs, with no documentation required for income, credit, or home appraisal. An FHA Streamline Refinance can help homeowners lower their annual mortgage insurance premium (MIP) or even get a partial refund of their upfront MIP payment.
The FHA Streamline Refinance resets your mortgage with a lower interest rate and monthly payment. If you have a 30-year FHA mortgage, you can use the FHA Streamline to refinance into a cheaper 30-year loan. 15-year FHA borrowers can refinance into a 15- or 30-year loan. The FHA Streamline does not cancel mortgage insurance premium (MIP) for those who pay it. But annual MIP rates may go down, depending on when the loan was originated.
The borrower pays closing costs on an FHA Streamline Refinance. Unlike other types of refinances, you cannot roll these costs into your loan amount. FHA Streamline closing costs are typically the same as other mortgages: 2 to 5 percent of the mortgage amount, which would equal $3,000 to $7,500 on a $150,000 loan. The difference is, you don’t have to pay for an appraisal on an FHA Streamline, which could save about $500 to $1,000 in closing costs.
No, the FHA Streamline Refinance does not eliminate mortgage insurance. Refinanced FHA loans still have the FHA’s annual mortgage insurance, as well as a new upfront mortgage insurance fee equal to 1.75 percent of the loan amount. The upfront fee is added to your loan amount. However, if you use the FHA Streamline Refinance within three years of opening your loan, you’ll be refunded part of your original UFMIP fee — thus lowering the total mortgage amount.
To qualify for an FHA Streamline Refinance, your current home loan must be insured by the FHA. If you’re not sure whether it is, ask your lender. FHA also requires three months of on-time payments and a 210-day waiting period since your home’s last closing date (either purchase or refinance). Finally, the FHA Streamline Refinance must have a purpose. That usually means the refinance needs to lower your combined interest and insurance rate by at least 0.50 percent.
Technically, the FHA Streamline does not require a credit check. That means homeowners could potentially use the Streamline Refinance even if their credit score has fallen below the 580 threshold for FHA loans. However, some lenders may check your credit report anyway. So if your credit is on the lower end, be sure to shop around.
No, you cannot take cash out on an FHA Streamline Refinance.
FHA homeowners are eligible for a Streamline Refinance 210 days after their last closing. That means you must have made six consecutive mortgage payments since you purchased or refinanced the home.
Yes, you can use the FHA Streamline Refinance more than once. You just need to meet FHA’s guidelines — meaning it’s been at least 210 days since your last refinance, you’ve made your last three payments on time, and you can lower your rate at least 0.50 percent.
The big benefit of an FHA Streamline Refinance is that you can switch your FHA loan to a lower rate and monthly payment. You can save money by getting rid of your existing higher interest rate without as much hassle as traditional refinancing options. Another benefit of the FHA Streamline is that there’s no home appraisal – so you can refinance into a lower FHA mortgage rate even if you have very little equity or your loan is underwater.
The FHA Streamline Refinance is probably worth it if you can lower your mortgage rate and monthly payment a significant amount. It’s an especially good deal for homeowners who purchased or refinanced from 2010 to 2015, because FHA has since lowered its annual mortgage insurance rates. By refinancing a pre-2015 mortgage with the FHA streamline, you may be able to drop your annual mortgage insurance rate from over 1 percent to just 0.85 percent.
FHA mortgage insurance premium (MIP) lasts 11 years if you made a down payment of 10 percent or more. It lasts the full life of the loan if your down payment was less than 10 percent. The only way to get rid of FHA mortgage insurance is by refinancing your current FHA loan into a conventional loan without PMI. To do this, you’ll need at least 20 percent equity in your home and a credit score of at least 620 or higher. You’ll also need to pay closing costs and complete the new loan’s underwriting process.
A non-credit qualifying FHA Streamline Refinance Loan won’t affect your credit score very much because your new loan balance will be about the same size as your old loan balance. Since the FICO scoring model considers the age of your loans, you may lose a few points by replacing an older mortgage with a new mortgage. But the effect tends to be minimal, especially if you’ve had your current loan only a few years. The credit-qualifying Streamline Refinance will check your credit score which could temporarily lower your score a little.
The FHA Streamline Refinance’s biggest strength is its simplicity. But that could also be seen as its greatest weakness. Because you’re skipping the home appraisal, and the credit qualifying process in many cases, you can’t increase your loan amount to get cash back. Another con: You can’t refinance out of paying mortgage insurance like you can with a conventional loan.
The FHA Streamline Refinance skips the home appraisal. This means you could close on the loan about a week sooner than you could with other refinance loans. Still, you’ll likely need four to five weeks to close on the new loan.
Check your FHA Streamline eligibility
FHA mortgage rates are low and homeowners typically close faster with a Streamline Refinance. Remember: the sooner you close, the bigger your FHA MIP refund.
Get started by checking today’s FHA refinance rates to see what you could save.