What Is a Streamline Refinance?

March 30, 2012 17 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.

17 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.

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