Mortgage Q & A: FHA Streamline Refinance Program

Q: I am underwater on my home and am living on a tight budget. A guy at work told me that FHA offers a program for people like me who have FHA mortgages. I keep hearing that the recession is over and figured all of these programs went away. My mortgage payments are current, but it would be nice to lower them if possible.

A: The Federal Housing Administration (FHA) provides its approved lenders with mortgage insurance that reduces the lenders' risk of losses on mortgages made under FHA programs. The streamline refinance program offers borrowers of FHA loans an opportunity to refinance their mortgages without an appraisal. Eligibility requirements for an FHA streamline refinance include:

  • Applicant's existing mortgage loan must be insured by FHA
  • Payments on the mortgage being refinanced must not be delinquent.
  • The streamline refinance must either lower the monthly principal and interest payment, or in certain cases, streamlined refinancing can be used to convert an adjustable rate mortgage to a fixed rate mortgage.
  • Streamline refinance rules don't allow cash-out refinancing.

There are a few things to keep in mind. Although FHA establishes guidelines for its loan programs, their approved mortgage lenders may have additional requirements. You may be offered "no cost" streamline refinance options. FHA allows lenders to charge a higher mortgage rate in exchange for paying borrower closing costs. FHA regulations do not allow closing costs to be added on to the streamline refinance loan amount.

We recommend requesting FHA mortgage quotes from our network of FHA lenders. Make a list of questions, and compare the mortgage quotes. This process is worth the time it takes, as it can help you match streamline refinance options to your situation.

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