Is there a quick and inexpensive option to refinance my FHA mortgage?

FHA allows borrowers to streamline refinance an FHA-insured loan. The 'streamline' refers to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction.  Some lenders offer 'no cost' refinances by charging a higher rate of interest on the new loan than if the borrower financed or paid closing costs in cash.   The mortgage to be refinanced must already be FHA-insured and current (not delinquent).   
 
There are two streamline options available:
Credit Qualifying – The lender will perform a credit and capacity analysis, but no appraisal is required.
Non-Credit Qualifying – The lender does not need to perform a credit or capacity analysis or obtain an appraisal.  An abbreviated Uniform Residential Loan Application (URLA) may be used by the lender.  
 
On the date of the FHA case number assignment:
  • the Borrower must have made at least 6 payments;
  • at least 6 full months must have passed since the first payment due date; 
  • at least 210 Days must have passed from the Disbursement Date; and 
  • if the mortgage being refinanced was assumed, 6 payments must have been made since assumption.  

The streamline refinance must result in a Net Tangible Benefit to the borrower:
  • reduced Combined Rate (the interest rate on the mortgage plus the Mortgage Insurance Premium (MIP) rate), and/or
  • reduced term if the new interest rate does not exceed the current interest rate and the payment does not increase by more than $50.00, and/or 
  • change from an Adjustable Rate Mortgage (ARM) to a fixed rate resulting in a financial benefit to the Borrower. 

However, if a Streamline Refinance is being processed with a Reduction in Term, the Net Tangible Benefit is met if all of the following apply:
  • the remaining amortization period of the existing Mortgage is reduced; and
  • the new interest rate does not exceed the current interest rate; and
  • the combined principal, interest and MIP payment of the new Mortgage does not exceed the combined principal, interest and MIP of the refinanced Mortgage by more than $50.
 
A table outlining the net tangible benefit standards is available in Handbook 4000.1. II.A.8.d.vi.(C)(4)(c)(ii). 

Find an FHA-approved lender in your area by visiting  https://www.hud.gov/program_offices/housing/sfh/lender/lenderlist

For additional information see Handbook 4000.1:II.A.8.d available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-03783