If you currently have a FHA loan and you’re considering refinancing to reduce your
monthly payment, then you will most likely want to take a look at what FHA has to offer
A FHA Streamline loan is a loan program for homeowners who already have a FHA
loan and want to reduce their payment. The “streamline” aspect of the loan refers to
the reduced paperwork used for qualification for the loan. The idea behind the loan is
to simplify the refinance process. For example, because you already have a FHA loan
and you are making your payments on time, there is no need to establish your credit
As a general description, most people will find that these are the basic requirements of a
Streamline loan are:
- The home being refinanced must be your primary residence.
- You must have a FHA loan now and it must be current. All payments
have to be paid on time for at least one full year.
- Your new loan amount can not be higher than your existing loan amount
without a new appraisal done. If your new loan amount will be lower than the
old, there is no appraisal requirement.
Some rare situations may exist outside of this such as refinancing an investment property
but those are relatively rare in the FHA world. The above applies to most homeowners
looking to refinance.
You will notice that income and credit are not listed on the basic requirements. This
is one of the main advantages of the streamline process. In today’s market, many
homeowners are looking for ways to reduce expenses because of temporary cut backs at
their job or for various other reasons.
A streamline loan may not be appropriate for you for any number of reasons. If you are
trying to avoid foreclosure you would not qualify due to a negative payment history. In
this case, you would want to look at the HOPE for home owners program, often referred
to as a loan modification agreement.
You can not take out cash with this streamline loan. Paying off credit cards or
consolidating debt would have to be done by a standard FHA or Conventional loan. You
will want to take a look at your overall financial picture and evaluate whether or not you
would benefit by consolidating other debts.
For those who took out their mortgage a few years ago and are paying a much higher
interest rate than would be available to them now, this is certainly a very good option to
explore. Sub prime loans or bad credit loans come with an inflated interest rate. After
several years a homeowner should have sufficient equity to refinance into a lower interest
rate with a lower principal and interest payment.
FHA Streamline loans are only available through FHA approved lenders. Your current
bank may or may not be able to assist you. HUD has setup a database of lenders you can
search online. Visit the site at www.hud.gov/ll/code/llslcrit.cfm and either search for
your lender or use the selection criteria to locate a lender in your area.