Pros and Cons of a No Closing Cost FHA Streamline Refinance


In recent years, the Federal Housing Administration has made some changes to its mortgage insurance programs. One of these changes is streamlining refinance, which can be a great option for those who have been denied a conventional loan due to their credit score or other factors.

The Federal Housing Administration (FHA) is a United States government agency that was created in 1934. The FHA’s main goal is to insure home loans and provide mortgage insurance. It was created in response to the Great Depression, and it was designed to make homes more affordable for low-income families.

The FHA Streamline Refinance program allows homeowners who are current on their mortgage payments and don’t have any outstanding liens against their property, such as an open foreclosure or bankruptcy, to refinance

Mortgage rates are at historic lows and home prices have been rising steadily. The combination of these two factors has made it a great time to buy a home for the first time or to refinance an existing mortgage.

However, not everyone qualifies for a mortgage or can qualify for the best interest rates. To help those people, the government created the FHA Streamline Refinance Program, which provides homeowners with an opportunity to refinance their mortgages while they still have good credit and equity in their properties.

What Is an FHA Streamline Refinance Mortgage?

A streamline refinancing is a mortgage refinance of an existing FHA-insured loan with low credit verification and underwriting requirements. FHA streamline refinancing programs are divided into two categories: credit-qualifying and non-credit-qualifying streamline refinances.

The term “streamline refinancing” refers to decreased documentation and underwriting. The existing loan must be FHA-insured. Junior and second liens are not eligible to be included into the new mortgage, although existing subordinate finance may be re-subordinated. There are no maximum combined loan to value (CLTV) limitations with streamline loans.

Appraisals are not required for FHA Streamline loans.

FHA Streamline Refinance Credit Qualifying and Non Credit Qualifying

A streamline refinance is a mortgage refinance of an existing FHA-insured loan that requires minimal credit verification and underwriting.

There are two types of FHA streamline refinancing programs: credit-qualifying and non-credit-qualifying streamline refinances.

Reduced documentation and underwriting are referred to as “streamline refinancing.”

The existing loan must be insured by the Federal Housing Administration (FHA). Although existing subordinate financing may be re-subordinated, junior and second liens are not eligible to be included in the new mortgage.

With streamline loans, there are no maximum combined loan to value (CLTV) restrictions. FHA Streamline loans do not require appraisals.

Closing Costs for an FHA Streamline Refinance

You will be responsible for closing costs. Closing costs may include things like title insurance, redevelopment taxes, and settlement fees, among other things.

Another cost that is included in the standard closing cost is the upfront funding fee premium of 1.75 percent, with the exception of FHA loans that were originated prior to April 2009, which require an upfront premium of only 0.01 percent.

To your advantage, you can roll the upfront mortgage insurance premium into the loan. If you're concerned about covering the closing costs for an FHA streamline loan, you can look for a no-cost refinance, but keep in mind that you'll be charged a higher interest rate as a result of the higher interest rate.

Credit Qualifying FHA Streamline Refinance

Credit Qualifying Program is required when:

Fha streamline requirements

Non Credit Qualifying FHA Streamline

The Non-Credit Qualifying loan does not need proof of employment, good credit, a satisfactory debt-to-income ratio, or asset qualifying; and there is no requirement for a home appraisal!

The residence must have been owned for a minimum of six months prior to settlement. The Borrower(s) must have made all mortgage payments on the subject property (including second and third mortgages, if applicable) within the month due, with a maximum of one 30-day late payment on any mortgage.

The Borrower must have made all required mortgage payments on the relevant property in the month prior to the mortgage disbursement.

Streamline mortgages (both non-credit qualifying and credit-qualifying) must pass the “net tangible benefit” test.

The FHA created the “net tangible benefit” test to ensure that a refinance is really advantageous to the borrower. The maximum amortization period for the new mortgage is limited to the lesser of 30-years, or the remaining amortization period of the existing mortgage plus 12 years.

FHA Guidelines for Rate and Term Refinance

The Rate/Term Refinance Program is not an FHA streamline program, but the traditional refinance loan.

Homeowners who would like to lower their current interest rate on their mortgage or lower the term (or both), should consider the FHA Rate/Term Refinance Program. The Rate/Term Refinance Program is available to homeowners with a current FHA home loan, but non-FHA borrowers are also welcome to apply.

Second mortgages must meet the guidelines for inclusion with the rate/term refinancing. Junior liens must be more than one year old at the time of the refinance.

Refinancing expenses can be included in the new loan; including title insurance, recordation and excise fees, etc. Credit, employment, debt-in-income ratio, and asset verification are typically needed for refinancing. The FHA requires an appraisal with the Rate/Term Refinance Program.

The loan to value ratio should not exceed 97.75 % for residences that have been owner-occupied for the past one year, or owner-occupied since acquisition if acquired within one year.

The debt to income ratio is calculated by adding the payoff amount(s) along with any junior liens plus closing and prepaid fees. The total amount is then divided by the appraised value. The debt to income ratio should not exceed 97.75%.

FHA Simple Refinance With Appraisal

While the FHA Simple Refinancing is comparable to the Rate/Term refinance, the Simple Refinance does not allow for the consolidation of junior mortgages (second or third) into the new refinance loan.

Simple Refinance mortgages allow for the addition of escrow closing and requirements costs to the new loan.

For the FHA Simple Refinance option, credit, employment, debt-to-income ratio, and asset qualifications are all necessary. A property appraisal is required. Existing mortgages must be insured by the FHA.

Frequently Asked Questions (FAQ)

Q. Does an FHA streamline remove PMI?

A. An FHA Streamline does not remove PMI. It is a refinance option that allows you to skip some of the steps normally required for a refinance, like providing income documentation.

Q. How does an FHA streamline work?

A. The FHA Streamline is a special program that allows homeowners with an FHA mortgage to refinance their home without having to undergo a full loan appraisal.

To qualify for the Streamline, borrowers must meet certain requirements, such as having a low loan-to-value ratio and being current on their mortgage payments. The Streamline also allows borrowers to skip the usual paperwork and underwriting process, making the refinancing process much faster and easier.

Q. Is an FHA streamline good?

A. The FHA Streamline is a great program for homeowners who are looking to refinance their mortgage. It is an easy process, and there are many benefits to refinancing through the FHA Streamline.

Q. What is a FHA streamline loan program?

A. The FHA Streamline loan program is a mortgage refinancing program for homeowners with an FHA loan. The program allows you to refinance your mortgage without having to go through the full loan application process. To qualify for the program, you must meet certain requirements, including being current on your mortgage payments and having a good credit score.

Q. What is a FHA streamline rate reduction?

A. A FHA Streamline Rate Reduction is a mortgage refinancing program that allows current FHA homeowners to refinance their mortgages at a lower interest rate. The program is available to homeowners who have a good payment history and currently have an FHA mortgage.

Q. Who qualifies for an FHA streamline refinance?

A. The FHA Streamline Refinance is a program designed to help current FHA borrowers lower their interest rate and monthly payment. To qualify, you must currently have an FHA loan and be in good standing. You also must meet certain credit and income requirements.

Read more questions and answers about FHA loans


In conclusion, the FHA Streamline Program is a great way to save money on your mortgage. It is easy to apply for and can save you a lot of money in the long run. If you are thinking about refinancing your mortgage, be sure to check out the FHA Streamline Program.

FHA underwriting Section C. Streamline Refinances