What Is a Streamline Refinance?

March 30, 2012 44 Comments »
What Is a Streamline Refinance?

Mortgage Q&A: “What is a streamline refinance?”

While qualifying for a mortgage refinance is generally a lot harder than it has been in the past (now that lenders actually care how your mortgage performs), there are less cumbersome options available.

In fact, many lenders offer “streamlined” alternatives to existing borrowers to lower costs and make refinancing more accessible.

Plenty of banks out there have their own “streamline refinance” programs that come with looser credit scoring requirements, easier income and asset verification, and limited paperwork.

And in some cases, you don’t even need to order an appraisal. Put simply, a streamline refinance takes a lot of the legwork (and time) out of the process, and may increase your chances of approval.

However, streamline refinances also come with their own list of requirements, namely that the refinance has a “net tangible benefit.” In other words, it should help the homeowner, not just put money in the pocket of the loan originator.

This generally means that the mortgage rate should drop by an amount that will eclipse any related fees, and/or that the loan is converted from an adjustable-rate mortgage to a fixed-rate mortgage.

Streamline Refinance Guidelines

Here’s a condensed list of possible streamline refinance guidelines and rules:

  • Must be current on your existing mortgage
  • Refinance must clearly benefit the borrower
  • No cash out allowed
  • Limited income/asset verification
  • Minimal credit requirements
  • Less paperwork
  • Faster processing
  • Lower closing costs
  • No appraisal necessary

*Keep in mind that these guidelines can vary widely from bank to bank, and not every lender will offer a streamline refinance, or approve you if they do.

FHA Streamline Refinance

Perhaps one of the most popular and well-known streamline refinance options out there comes courtesy of the FHA. In fact, the FHA has permitted “streamline refinances” since the early 1980s. Of course, they’ve become much more popular lately thanks to the mortgage crisis.

They make it easy to refinance your mortgage to a lower mortgage rate, without the need for an appraisal, many of which happen to come in low these days.

And with no credit scoring requirement and limited documentation requirements, most borrowers can qualify for a streamline refinance quite effortlessly, even if they don’t have adequate income, assets, or employment. The idea here is that a borrower with smaller monthly mortgage payments is a less risky borrower, which is good for the hard-hit FHA.

There are just a handful of simple requirements necessary for approval. As long as your existing mortgage is an FHA loan and in good standing (not delinquent), and the refinance will result in a lower monthly mortgage payment (or you’re converting your ARM to a FRM), you should be good to go. The only thing you really need to worry about is the seasoning requirements, including the following:

- you must have made at least six (6) payments on the FHA-insured mortgage before refinancing
– six (6) full months must have passed since the first payment due date of the original mortgage
– 210 days must have passed from the closing date of the original mortgage

Also note that no cash out can be taken out via a FHA streamline refinance. Only rate and term refinances work here.

However, you can get your hands on a no cost refinance, meaning you won’t necessarily need to pay out-of-pocket expenses, but you’ll be stuck with a higher interest rate in return.

This is common because the FHA doesn’t allow lenders to roll closing costs into the new mortgage amount on a streamline refinance without an appraisal.

Finally, because no appraisal is required, the FHA streamline refinance is an excellent option for those who are underwater on their mortgages.

Tip: President Obama recently lowered mortgage insurance premium costs on FHA Streamline Refinances to help more borrowers take advantage of the record low mortgage rates currently on offer.

VA Streamline Refinance

The FHA isn’t the only one offering streamline refinances. The VA also offers a streamlined “VA loan to VA loan” refinance, known as an “Interest Rate Reduction Refinancing Loan,” or IRRRL for short.

Yes, that’s a lot of “R’s,” but a VA streamline refinance is easy to execute and can save you a lot of money now that mortgage rates are so low.

The same basic rules apply. Your refinance must result in a lower interest rate, or you must switch from an ARM to a fixed-rate mortgage, and no cash out is permitted.

The VA does not require an appraisal or a credit underwriting package, and you have the option of rolling the refinance costs into the new loan or opting for a no cost refinance.

Additionally, a Certificate of Eligibility from the VA is not required, making a refinance a snap compared to the usual process.

HARP Streamline Refinance

You may have also heard of HARP and HARP 2.0, a streamlined loan program that allows underwater homeowners to refinance their mortgage, no matter how high their loan-to-value ratio (LTV) is.

The same simple qualification requirements (or lack thereof) apply here, though your loan must be owned by Fannie Mae or Freddie Mac, and must have been sold to the pair on or before May 31, 2009.

Additionally, your current LTV must be north of 80%, which isn’t a problem for most homeowners these days.

Finally, you must be current on your mortgage at the time of refinance, with no late payments in the past six months and no more than one late payment in the preceding 12 months.

Assuming you qualify, you should be able to get your hands on a much lower mortgage rate, even with an excessively high LTV, all with limited fees and closing costs.

Is Streamlining Your Refinance the Best Deal?

While a streamline refinance may be your easiest option, it may not be the best choice for you.

Whenever you’re in the market for a refinance, it’d be wise to take the time to shop around.

That means looking beyond your current lender and/or loan type to see if there’s something better out there.

You may find a lower mortgage rate with a new lender that will justify a more lengthy qualification process.

Sure, it can be a pain to refinance your mortgage, but the savings afforded each month and over your lifetime should definitely be worth your time.

Read more: When to refinance your mortgage.

44 Comments

  1. Michelle Fagan May 23, 2013 at 8:04 pm -

    Are you abe to streamline a PA FHA that is backed by a bond? We bought a new house last fall and kept our original townhome (owned for 7 years) to use as an investment property for our kids education down the road.

    We have a great tenant who will be in the townhome for another 15 months and we have not missed a mortgage payment. We received a letter 2 weeks ago from US Bank saying our townhome had to be our primary home for the life of the loan.

    We owe $75k on the property and after looking into other refinancing options, the streamline seems to be too good to be true. With other RBS institutions we were looking at $3k-$7k to close depending on how the appraisal goes.

    Any advice and help is greatly appreciated.

  2. Colin Robertson May 24, 2013 at 9:17 am -

    Hi Michelle,

    You may be able to execute an FHA streamline refinance on the townhouse (investment property), but only via the “Without an Appraisal” option, which comes with some limitations.

  3. Stephanie July 21, 2013 at 7:46 pm -

    Is there one particular bank or lender that specializes in streamline refinance loans, or does every bank do them? I want to use a bank that knows what they’re doing!

  4. Colin Robertson July 23, 2013 at 11:57 am -

    Lots of banks, lenders, and brokers offer streamline loans. However, there are certainly ones that specialize in them, so they may be better suited than say a big bank that primarily goes after purchase and/or traditional refinance business. Be sure to shop around, as you would for any other type of mortgage to find the right fit.

  5. Nicholas July 31, 2013 at 10:53 pm -

    The FHA streamline is a great deal for today’s underwater borrower – no appraisal and you get an amazing discount on your mortgage insurance premiums thanks to Obama. Can’t beat that.

  6. Terry GEbauer October 22, 2013 at 8:57 am -

    I currently have a conventional mortgage – Excellent Credit. I am interested in a Streamline loan. My last refinance was 1/25/2010. The rate is 5.375. I would love to refinance and skip the appraisal and all the additional costs. The date I last refinanced keeps coming up as a reason I cannot. Why,

  7. Colin Robertson October 22, 2013 at 9:58 am -

    Terry,

    HARP (the streamline refi program for conventional loans) is only available to those who took out their mortgage before June 1, 2009. This is the cutoff date, which some politicians have been trying to push forward to no avail (yet). Stay tuned, it could happen as they make a renewed push for HARP.

  8. Meghan L. January 24, 2014 at 9:32 am -

    I heard there’s going to be a streamline refinance program for non-Fannie Mae loans. Is this true or just more media hype?

  9. Colin Robertson January 26, 2014 at 10:20 pm -

    There has been talk of a streamline refi program for private mortgages, such as those not backed by Fannie Mae or Freddie Mac, but thus far nothing has happened, and the longer we get away from the crisis (and the closer we get to a recovery), the less chance such a program will materialize. But there has been talk of one lately, so it’s still possible!

  10. Marian January 31, 2014 at 7:47 am -

    Can you do a streamline refinance after a loan modification? Or a regular refinance?

  11. Latesha February 5, 2014 at 9:05 am -

    Is there a streamline refinance program for non-conforming loans? My loan isn’t owned by Fannie Mae or Freddie Mac.

  12. Colin Robertson February 5, 2014 at 10:11 am -

    Marian,

    Now that mortgage volume is down, lenders are getting a lot more flexible in allowing refinances after a loan mod. The only requirement in some cases is that you’ve been current on the loan for 24 months. Not sure they can streamline it though…

  13. Colin Robertson February 5, 2014 at 10:33 am -

    Obama has mentioned opening up HARP for non-Fannie/Freddie loans, but it hasn’t happened yet and might not ever come about. If you have a non-conforming loan, you might want to contact your lender/loan servicer for options, assuming you can’t obtain a traditional refinance. You might be able to execute an FHA short refinance if you’re underwater and current on your mortgage.

    http://www.thetruthaboutmortgage.com/fha-short-refinance-option-coming-soon/

  14. Patricia Duffey May 22, 2014 at 9:17 am -

    Can I convert a conventional Freddie Mac loan to a FHA Streamline loan? I’m in GA, & my home is “underwater”. I’ve never been late or missed a payment since 4/99. I’ve had various loan re-fi’s with Wells Fargo (W.F.) I just want to lower my interest rate from 6.75% to the lowest rate possible. My payment is $864.00, & want to save money. It seems that there’s a program for everyone, but me. Please reply if you can help or advise me. Thnx

  15. Colin Robertson May 22, 2014 at 9:36 am -

    Patricia,

    The first rule to streamline an FHA loan is that the existing mortgage to be refinanced must already be FHA-insured. If you have a conventional loan you should be able to qualify for a HARP refinance instead, which is offered to those with Fannie Mae or Freddie Mac loans.

  16. Lyndie Callahan July 18, 2014 at 4:17 pm -

    I have been trying to get a streamline to lower my payments on my current FHA loan but was told by Bank of America I didn’t qualify because I didn’t remove my husband from the title when he died 2 years ago and I need to be on the title by myself for 6 months. I was wondering if this was true? The bank wants me to do a conventional loan instead. I would really like some advice please if you have time. Thank you.

  17. Colin Robertson July 18, 2014 at 6:17 pm -

    Lyndie,

    I believe your husband would have to be off title for six months and you’d have to show proof of making payments for six months. Though there might be an immediate option via a “credit qualifying streamline refinance” with the FHA. However, it does require verified income and a credit pull to determine if you can keep up with payments. You might also consider a broker who can give you a bunch of options at once to see what’s best for your situation. Big banks aren’t typically very savvy if anything is the least bit complicated.

  18. Eva Jimenez August 23, 2014 at 12:54 pm -

    What constitutes a Refi? How does it differ from a modification? It’s a Freddie/Fannie first mortgage, and I have a second on the property. The lender is doing a “modification” with reduced fixed rate instead of variable, plus lower payments, longer term and a reduced principal balance. The lender says is a “mod” but they want me to sign off on it. I say its a refi, they assured me it’s not. My concern is that the lender will not require an escrow account for either taxes or insurance, so my risk goes way up. Your thoughts?

  19. Colin Robertson August 25, 2014 at 8:50 am -

    Eva,

    A modification is just as it sounds, modifying the terms of your existing loan in some way, though the definition can get murky if the lender extends the term and changes the interest rate. A refinance means your existing mortgage is being paid off and replaced with a new mortgage. Not requiring an escrow account doesn’t mean it’s high risk…in fact, lower risk loans do not require escrows in many cases. If you want to escrow your taxes and insurance, you should have that option.

  20. libby K October 6, 2014 at 7:47 pm -

    My lender is telling me I can’t do a streamline refinance because the loan needs to be in the original borrowers names . My husbands will be removed an have someone to be a co – borrower with me . Everything I have read sounds like I should be able to do this . Can you help me ?

  21. Colin Robertson October 7, 2014 at 10:12 am -

    Libby,

    If you think you qualify based on what you’ve read, perhaps speaking to a different lender and/or a mortgage broker might be helpful. Generally, you need to prove the ability to make payments and/or show proof of making payments on the existing loan.

  22. Carmen January 8, 2015 at 11:04 am -

    How do you shop for a mortgage refinance? It seems that all the bankers I deal with want to pull my credit or want to stall before they give me any hard numbers.

  23. Colin Robertson January 8, 2015 at 11:12 am -

    Carmen,

    Unfortunately that’s how the industry operates, much like any other competitive product offered. The good news is that FICO considers credit inquiries within a certain period as just one credit hit. But you can still shop around without a credit report; just tell people your estimated credit score and all other pertinent details to get a reliable quote. There’s also Zillow’s marketplace, that allows for anonymous quotes, your local bank/credit union, and so on. There are many options but all require you to negotiate and be firm. Good luck!

  24. Manuel January 20, 2015 at 8:49 pm -

    I’m trying to streamline refinance. The lender sent me the GFE and it is showing settlement charges. The lender offer no-cost and I don’t understand how will pay that amount.

    I ask the lender and she stated that:
    “The charges all of those will be covered with a lender credit and will show as a $0 balance on the final documents. You should be able to see on the GFE the credit as well.”

    I don’t getter “lender credit” and how that can be no cost to me.?

  25. Colin Robertson January 21, 2015 at 11:54 am -

    Manuel,

    Lenders will offer you a higher-than-market interest rate (say 4.5% versus 4%) and receive a credit in return. That credit is X amount of dollars and is used to offset or cover all your closing costs. So you effectively pay for the costs via a higher rate of interest.

  26. margaret g January 23, 2015 at 9:37 am -

    what they do not tell you is you will pay prepaid mpi again in amount of 3000. or more . why would you when i myself paid 5000. the first time. not worth it

  27. Kenneth February 9, 2015 at 5:26 pm -

    The problem with the fha streamline or any fha loan for that matter is that you now have to pay the pmi insurance for the life of the loan. Instead of it being cancelled after reaching the loan to value rate of 80%. So sure you can save 60$ a month on your mortgage but now you will be paying thousands & thousands more over the life of the loan. In my case the pmi is 600$ a month, I’m set to have it cancelled in 5 years, I will save 600$ a month for the following 25 years, this is not possible with the new changes in the fha.

  28. Colin Robertson February 11, 2015 at 3:23 pm -

    Good point Kenneth. I hope borrowers realize what they’re getting into down the road by saving money today…though not everyone actually holds their mortgage for more than a few years.

  29. rebecca February 22, 2015 at 10:43 am -

    Im working on streamlining my FHA loan. I reviewed the application with my lender yesterday and noticed the term said 30 years- we bought our house 18 months ago, shouldn’t the term reflect that? shouldn’t the term of the loan say 28 years? Also, its my understanding that FHA streamlining grants a 3.75% interest rate. is that the case? I just want to be sure that not only is our monthly payments going to decrease but that we’re still paying the same $ into the amount owed on the mortgage. How can i be sure? Thank you!

  30. Colin Robertson February 22, 2015 at 2:03 pm -

    Rebecca,

    The term starts over when you refinance. What some people do is make their old, higher monthly payment to pay down the mortgage faster at the new low interest rate. Rates fluctuate and can vary based on your specific loan scenario. Have the lender show you the math to ensure it’s actually saving you money both monthly and long-term.

  31. jessie March 18, 2015 at 6:43 pm -

    Hi,my lender offered two options which would you believe would be a more beneficial? One is to do a piggy back loan like we started several months ago. We do a first to 80% of appraisal and a 2nd for up to 10% of value or the difference you need. That eliminates mortgage insurance. But all borrowers need to have 700 FICO scores for the 2nd loan program. The other option is we can do a streamline. The streamline program requires no appraisal and no qualifying. We replace your existing FHA loan with a new one with the reduced mortgage insurance. It looks like in a streamline your payments will go down about $235/month.

  32. Cara March 26, 2015 at 5:45 pm -

    Hi Colin,

    I’m talking to my lender about an FHA Streamline, and they have included a $400 non-refundable application deposit AND a request for appraisal in the disclosure forms. Is this normal?

  33. Colin Robertson March 30, 2015 at 10:36 am -

    Cara,

    It’s pretty common for lenders to take an application fee/deposit, which usually goes toward the appraisal cost.

  34. neneth April 3, 2015 at 6:52 pm -

    I am interested in refinancing my FHA loan.I have a 30 year loan at 6%. I got my mortgage in 2007 and refinance once in 2010 , what is the best one applicable to my current loan. If I do that , will I go back to 30 years again?

  35. Adlemi April 3, 2015 at 11:16 pm -

    Hi Colin,i’m working on my FHA Streamline mortgage to lower my monthly payment, i have 134,973 to refinance, for 3.625 interst rate ,they are requiring me to have cash of 1786.02 when we close to cover for the upcoming property tax, is that how it supposed to be,pls. Advise thanks

  36. Colin Robertson April 4, 2015 at 12:09 am -

    Adlemi,

    It’s possible if taxes are due around the time of the refinance. Ask them for details to clear it up.

  37. Colin Robertson April 4, 2015 at 12:46 am -

    Neneth,

    It depends on all your loan details…could even make sense to get away from the FHA to avoid pricey insurance for life of the loan. Shorter terms may be available.

  38. Adlemi April 5, 2015 at 12:59 am -

    Hi Colin, you think its better to refinance via streamline FHA with 3.625 APR,I’m on my 6th year of my 15 year mortgage,4.5 APR, The reason I want to refinance is to lower my monthly payment which I will by $400 if i refinance,what you think? Thanks

  39. Colin Robertson April 5, 2015 at 4:15 pm -

    Adlemi,

    It depends what your goal is…have you looked at conventional financing to avoid mortgage insurance? Or a 10-year fixed to avoid extending the loan term, assuming you want to pay off the loan? Lots of options to consider, but all personal preference.

  40. Adlemi April 5, 2015 at 4:52 pm -

    Colin, if i do conventional loan, my house needs appraisal, my house is in good shape except some rotten wood in my front house wood works moulding which im afraid it will affect the value of the house, i really dont want to pay off the loan ,just need less monthly mortgage payment

  41. Wendy April 15, 2015 at 5:46 pm -

    Colin,In 2012 I became a joint buyer with someone on an FHA loan of 220.000@ 3.7 %.We were going to be married but at the end of that year I was diagnosed with cancer and it tore the relationship apart.I left the home and he remained in the home and has continued to make payments on time it has now been three years.Now I want to purchase a home of my own but people are telling me I am not going to be able to do that until my name is removed from that FHA loan,I live in Arkansas.I really want to own my own place.Would we be able to streamline refinance and remove my name from the loan.He makes enough money to cover the loan payment with no problem.If not my next question is do i have any rights to moving on that property since my name is a joint buyer.I dont mean to kick him out I am referring to possible putting a manufactured home on the fifteen acres that comes with home.Please Help…

    f

  42. Colin Robertson April 20, 2015 at 4:46 pm -

    Hi Wendy,

    It may be possible to get removed from that loan but he may need to prove that he can qualify for the loan on his own. Alternatively, you could look at non-FHA options for your new mortgage, though if you’re still on the hook for that FHA loan, it may hurt your chances based on a higher DTI and decreased affordability.

  43. kelton April 21, 2015 at 11:21 am -

    Colin

    First of all I wanted to say thank you for taking your time and responding to our questions.

    My property is under FHA loan and recently I was getting in mail eligibility notices on refinancing. I called today and I was told that I should be qualified for streamline refinance within the next 10 days as long as my credit score is above 580 and that I haven’t missed any payment.
    I asked the agent that what are the refinancing costs and I was told that there isn’t any cost. Too good to be true right? If there aren’t any fees how do banks make the money with streamline refinancing?

  44. Colin Robertson April 21, 2015 at 12:35 pm -

    Kelton,

    By no costs they mean no out-of-pocket costs to the borrower. Fees are still paid via the interest rate, but over time as opposed to at closing. Also note that mortgage insurance may be in place for the entire loan term if it isn’t already.

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