FHA Streamline Refinance: 2024 Guidelines and Loan Requirements

Are you considering refinancing your FHA mortgage to lower your interest rate and reduce monthly payments? You may be eligible for a low-doc FHA streamline refinance.

What Is an FHA Streamline Refinance?

An FHA streamline refinance is a convenient way to cut your interest rate and payment without the paperwork and process of a traditional refinance.

You can refinance with:

• No appraisal

• No pay stubs

• No W-2s

• No tax returns

• Limited (if any) credit check

You must currently have an FHA loan to be eligible.

This simplified process can make an FHA streamline an attractive option for borrowers refinancing with bad credit or little or no home equity.

Guidelines for an FHA Streamline Refinance

Although most applicants won't encounter credit score or income requirements, there are still some guidelines that you'll need to meet to be eligible for an FHA streamline refinance.

Specifically, your existing mortgage must:

• Be an FHA loan

• Be current on its payments

• Have been opened at least six months ago

• Have had no late payments in the past six months and no more than one in the past year

On top of these mortgage requirements, refinancing must also provide you with a “net tangible benefit.” (More on what this is later.)

Planning to extend the length of your loan to reduce payments? With an FHA streamline refinance, you can add up to 12 years to your mortgage’s term.

Note: Despite FHA guidelines not requiring a credit check for streamline refinances, some lenders have their own standards. If the mortgage company you’re working with can’t approve you for an FHA streamline refinance because of your credit score, shop around for another lender who can.

How Long Do I Have to Wait to Refinance?

You can qualify for an FHA streamline refinance 210 days after closing on your current mortgage. However, it must also be at least six full months after your first payment due date and you must have made a minimum of six payments. This waiting period is referred to as loan seasoning.

If you have an assumed FHA mortgage, you must have made at least six monthly payments since assumption to be eligible.

How Many Times Can You Do an FHA Streamline Refinance?

Even though there's a waiting period between refinances, there's no limit to how many times you can reduce your rate with an FHA streamline refi. If it’s worth refinancing, there’s no reason you can’t get a streamline refinance for the second or third time.

Be careful about it, though. Each refinance requires closing costs and could increase your loan balance.

Net Tangible Benefit Requirement for FHA Streamline Refinances

To qualify for a streamline loan, refinancing has to provide you with what the FHA refers to as a "net tangible benefit." What counts as a net tangible benefit varies based on the type of mortgage you have and the type of loan that you’re refinancing to.

Fixed-Rate Mortgage to a Fixed-Rate Mortgage

If you currently have a fixed-rate mortgage and are refinancing to another fixed-rate loan, you must reduce your combined interest rate and mortgage insurance premium by at least 0.5%.

Fixed-Rate Mortgage to an Adjustable-Rate Mortgage

Refinancing from a fixed-rate to an adjustable-rate loan requires your new mortgage to be at least 2% lower.

Adjustable-Rate Mortgage to a Fixed-Rate Mortgage

Refinancing from an adjustable-rate mortgage to a fixed-rate mortgage counts as a net tangible benefit as long as your new loan is no more than 2% higher than your current combined rate.

Adjustable-Rate Mortgage to an Adjustable-Rate Mortgage

Refinancing from an adjustable-rate mortgage to another adjustable-rate mortgage requires you to reduce your rate by at least 1%. The exception is when you’re refinancing a mortgage with 15 months or more until the next payment change to a new one-year adjustable-rate loan. In that case, your rate reduction must be at least 2%

Note: If you're refinancing a fixed-rate mortgage into another fixed-rate mortgage and reducing the term by three years or more, your new rate does not need to meet the 0.5% savings requirement. However, it still needs to be lower than your current combined rate, and the refinance must not increase your monthly payment by more than $50.

FHA Streamline Refinance Closing Costs

One benefit of a streamline refinance is saving on appraisal fees. This could reduce closing costs by $500 or more. Overall, you can expect FHA streamline refinance closing costs to run 3-5% of your loan balance. However, they may be lower if you qualify for a UFMIP refund.

It’s important to note that with the streamline refi program, you must pay your closing costs at closing – they can’t be financed into your loan balance. Some lenders, however, may offer a closing credit in exchange for a higher interest rate on your mortgage.

Credit Qualifying vs. Non-Credit Qualifying Refinances

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

Most homeowners with an FHA mortgage will be eligible for a non-credit qualifying streamline refinance. This means you won't have to reverify your credit, provide proof of earnings, or meet debt-to-income requirements.

Since a streamline refinance typically lowers your monthly payment, the fact that you’ve been able to meet your debt obligations so far reassures lenders that you’ll continue doing so when paying less per month.

If you’re removing a co-borrower from your mortgage, however, you’ll need to go through the standard credit and income verification process. Even still, credit qualifying streamline refinances come with an appraisal waiver in most situations.

Note: If you're removing a co-borrower because of death, divorce/separation, or court order, you may still be eligible for a non-credit qualifying refinance.

What Documents Will I Need for a Streamline Refinance?

The loan program is called a streamline refi because the process is much more straightforward than a standard refinance. In most cases, you won't need to provide income documentation like paystubs or tax returns.

There is still, however, some paperwork that your lender will request to underwrite your loan.

Some documents that you can expect to be asked for are:

• Your most recent mortgage statement

• The mortgage note for your current FHA loan

• The final statement (HUD-1) or Deed of Trust for your current FHA loan

• Contact information for your homeowners’ insurance agent to verify policy coverage

• Two months of bank statements showing that you have funds required to close

• Utility bills (or other documentation) that prove you occupy the property as your primary residence (when applicable)

FHA Refinances: Mortgage Insurance Premiums

All FHA refinances, including streamline loans, require you to pay mortgage insurance premiums. There are two types of premiums that you’ll encounter: an ongoing charge lumped in with your payments and a one-time fee due at closing.

Related: Refinance an FHA Loan with Conventional to Remove Mortgage Insurance

Annual Mortgage Insurance Premium

Your annual mortgage insurance premium (MIP) is included in your monthly mortgage payments. Prices vary based on your loan and down payment, but most borrowers can expect to pay an annualized rate of 0.55%. When spread across twelve payments, this equals a monthly cost of around $45 per $100,000 financed.

Before early 2023, annual MIP rates ran 0.85% for most borrowers. If you took out your FHA loan prior to then, you may be able to slash your payments even further with an MIP reduction.

Upfront Mortgage Insurance Premium (UFMIP)

Your upfront mortgage insurance premium (UFMIP) is a one-time fee included in your closing costs. Nearly all FHA loans have an UFMIP of 1.75%.

If you're refinancing a $150,000 mortgage, you'd pay a UFMIP of $2,625. On a $350,000 loan, the UFMIP would be $6,125.

UFMIP Refund

If you’ve had your current FHA loan for less than three years, you should be eligible for a partial UFMIP refund. This refund will apply to your new UFMIP.

For instance, if the UFMIP for the streamline refinance were $3,000, and you receive a $1,400 UFMIP refund, you would only need to pay or finance a $1,600 UFMIP for the new loan.

The percentage of your original UFMIP eligible to be refunded depends on how many months it’s been since you closed on your loan.

Non-Owner Occupied Properties

FHA loans are only available for your primary residence when purchasing a home. However, guidelines allow you to refinance non-owner occupied properties already secured by an FHA mortgage.

This would typically occur when someone took out an FHA loan, lived in the home for at least the year required, and then began using the property as an income-generating rental.

Your new mortgage must be fixed-rate to qualify for a non-owner occupied streamline refinance, and you can expect higher interest costs than on a primary residence.

Cashing Out Home Equity With an FHA Refinance

An FHA streamline refinance only allows you to receive up to $500 back at closing. Even then, that limit is in place to provide leeway for minor miscalculations of closing charges. In practice, you can’t cash out home equity with an FHA streamline refinance.

Do you have built-up equity that you would like to use to fund home improvements, consolidate high-interest debt, or purchase a second home? You will need to apply for an FHA cash-out refinance.

With an FHA cash-out refinance, you can borrow up to 80% of your property's current value.

Cash-out refinances do require an appraisal, and you will have to complete a credit check and income verification. However, FHA requirements are more relaxed than for a conventional refinance. You can qualify for an FHA cash-out refinance with a credit score as low as 500 and a debt-to-income ratio as high as 50%.

Reduce Your Monthly Payment With an FHA Streamline Refinance

If interest rates have dropped since you took out your FHA mortgage, you may be eligible for a streamline refinance. The qualification process is much easier than with other types of refinances. In most cases, you can close faster and without needing an appraisal.

If you’re ready to reduce your monthly payment with an FHA streamline refinance, check out the current rates and apply with an FHA-affiliated lender today.