FHA streamline refinance programs allow homeowners to refinance their FHA loans easily and quickly. FHA streamline refinances have some unique advantages.
- Employment verification is not required.
- Income verification is not required.
- Credit score is not required.
In many cases, a home appraisal is not required. You can be out of work, have awful credit and no home equity and still be approved. That's because FHA already insures your mortgage, so it's already on the hook if you default. No matter how bad your finances are, it's better for the FHA to approve a loan that improves your situation.
In some cases, however, it's best to refinance with an appraisal.
FHA Streamline Refinance Without Appraisal
Streamline refinances without appraisals are appropriate when you don't need to wrap your refinancing costs into your new mortgage. As long as you're either paying your closing costs out-of-pocket or having the lender pay them for you (this option requires a higher refinance rate), you don't need an appraisal.
What if the property you're refinancing is no longer your primary residence? That's okay; streamline refinancing is available to owners of investment and second homes, but in that case, HUD does not allow closing costs to be wrapped in – you'd have to do the streamline without appraisal and either pay your closing costs out-of-pocket or have your lender cover them.
If you've taken out a second mortgage or home equity line of credit (HELOC), you can't wrap these loans into a streamline without appraisal – you have to refinance the first mortgage only and leave the second mortgage alone.
The repayment term of streamline loans without appraisals can't exceed the lesser of 30 years or the remaining term on your old loan plus 12 years.
Streamline Refinancing with Appraisal
Streamline refinancing with an appraisal allows homeowners to wrap their refinance costs into their new loan. This means you can add in:
- Lender fees
- Interest to the end of the month for the new loan
- Prepaid homeowners insurance premium deposits
- Monthly mortgage insurance premiums
- Prepaid property taxes
Discount points to buy down the interest rate cannot be wrapped into the new loan. You'd have to pay those out-of-pocket.
Streamline refinances with an appraisal may have a maximum term of 30 years.
More About Streamlines
HUD allows a combined loan-to-value ratio (CLTV) of 125 percent for a streamline refinance – this means the balance of your new refinance mortgage plus the value of any subordinated second mortgage or HELOC cannot exceed the original property value by more than 25 percent. So if your home was purchased for $100,000 with an FHA loan, your CLTV limit would be $125,000. If your FHA loan balance is $90,000, the biggest second mortgage you could have would be $35,000. (That's because $125,000 - $90,000 = $35,000.)
You may receive no more than $500 cash back at closing. That can happen when estimated closing costs turn out to be higher than actual closing costs.
FHA streamline refinance loans can help homeowners with FHA loans refinance without an appraisal, credit check or income verification. However, mortgage lenders may choose to require some or all of these things. If you're concerned about your income or credit, discuss this with lenders and work with one that does not require credit or income verification. You can get custom FHA refinance quotes from several competing FHA lenders by completing a simple form.