FHA loan down payment requirements and guidelines

Quick insights

• An FHA streamline refinancerefinance-hl000061 may allow you to refinance your existing FHA mortgage in less time and with fewer requirements to qualify.
• FHA streamline mortgages usually have credit qualifying and non-credit qualifying options.
• To qualify for an FHA streamline refinance there must be a net tangible benefit for the homeowner.

If you have a Federal Housing Administration (FHA) loan and are interested in refinancing, the FHA Streamline Refinance could be your best option.

The streamline refinance process is designed to simplify refinancing for borrowers.

What is an FHA Streamline Refinance?

An FHA Streamline Refinance is a type of mortgage refinance offered by FHA-approved lenders and insured by the FHA. These refinances are often considered a relatively speedy way for homeowners to refinance their existing FHA mortgages because they may require limited documentation from the borrower and less underwriting requirements for the lender.

How do FHA Streamline Refinances work?

There are two options for streamline refinances:

• Credit qualifying: Lenders will check your credit score and review your debt-to-income (DTI) ratio as part of the process.
• Non-credit qualifying: The lender will not review your credit score or DTI ratio as part of the process.

Whether or not you can apply for the non-credit qualifying option will depend on your lender and why you’re removing an original borrower. Both types allow borrowers to skip the home appraisal, a critical step in traditional refinancing.

Omitting some of the required documentation reduces the burden put on underwriting, which can expedite the application review. Skipping the home appraisal also accelerates the process.

FHA Streamline Refinance program pros and cons

FHA Streamline Refinances come with unique benefits and risks borrowers should consider before committing. Here are some of the most important ones:

Pros

• Streamlined process: An FHA Streamline Refinance is viewed as a quicker approach to refinancing due to the simplified application and underwriting process.
• Potentially reduced documentation: With an FHA Streamline Refinance, borrowers have the option to skip documentation related to their credit and income, which expedites the process.
• No home appraisal requirement: Qualified borrowers aren’t required to conduct a home appraisal.
• Potentially fewer fees: FHA Streamlines can be less costly, since an appraisal fee and other costs may not be applicable.
• Closing cost flexibility: Some lenders allow you to use premium pricing to pay for closing costs for the loan, allowing you to refinance without the initial out-of-pocket expenses. However, you’ll pay a higher interest rate.

Cons

• Closing costs: Although an FHA Streamline Refinance may be associated with fewer upfront costs, there are still closing costs involved.
• Mortgage insurance requirements: FHA Streamline Refinances require both an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP), which is paid monthly. Depending on the original MIP payment on your FHA insured loan, a streamline could increase the monthly MIP cost.
• Cash back limitations: Only $500 incidental cash back is permitted.
• Good payment history: You can only qualify for an FHA Streamline Refinance if you have a good payment history and aren’t delinquent on your mortgage.

Qualifying for an FHA Streamline Refinance

Here are the program guidelines and requirements.

Must have an FHA loan

You can only participate in the program if you’re refinancing an FHA-insured loan. Conventional loans aren’t eligible.

Must receive net tangible benefit

FHA policy mandates that borrowers receive a net tangible benefit to qualify for streamline refinances. There are three ways borrowers can meet their definition.fha-single-family-housingfha-single-family-housingfha-single-family-housingfha-single-family-housing

• Reduce the combined rate: This is the total cost of the interest rate and your mortgage insurance premium costs.
• Change the loan type: You’re changing an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
• Reduce the loan term: This shortens the remaining amortization period on the loan, such as switching to a 15-year term from a 30-year term.

Mortgage seasoning

Here are the policies related to the age of the mortgage and recent payments:streamline-refinance-fdic-2024streamline-refinance-fdic-2024streamline-refinance-fdic-2024

• At least 210 days have passed since closing on the mortgage being refinanced.
• You’ve made at least six payments on the mortgage.
• At least six months must have passed since the first payment due date.
• Full mortgage payments have been made for the past six months within the month the payment is due.
• There’s no more than one 30-day late payment within the past year.

If you’ve participated in a mortgage forbearance plan, you may still be able to qualify for the credit qualifying option. Talk to your lender to learn about the additional requirements.

How to apply for a FHA Streamline Refinance

Refinancing your home doesn’t have to be complicated. You can apply for an FHA Streamline Refinance by first finding an FHA-approved lender in your area who offers FHA Streamline Refinancing (such as Chase) and discussing whether you meet the relevant requirements.

If you do meet the necessary qualifications for an FHA Streamline Refinance, you'll be required to gather and submit all the necessary documentation requested by the lender.

In summary

FHA Streamline Refinances are for existing FHA borrowers looking for a faster way to refinance their FHA mortgage with reduced documentation. Although FHA Streamline Refinances may be beneficial for some borrowers, it’s helpful to consider the pros and cons before making your decision. Reach out to a Home Lending Advisor or trusted professional to understand the requirements, qualifications and how this type of refinance may impact you.

FHA streamline refinance FAQs

How much are closing costs with an FHA Streamline Refinance?

The closing costs may be less than what you’d see for other refinances. The exact amount will depend on your financial circumstances and the lender you choose, but they usually range between 2% and 6% of the loan value.

What credit score do you need for an FHA Streamline Refinance?

If you qualify for a non-credit qualifying streamline refinance, the lender isn’t required to check your credit score.

How many times can you do an FHA Streamline Refinance?

There’s no limit to how many times you can participate in the FHA Streamline Refinance program. However, keep in mind that each time you refinance, you’ll need to meet the net tangible benefit and mortgage seasoning requirements.