FHA Streamline Refinance: Complete FHA Streamline Refinance Guidelines
What Is An FHA Streamline Refinance?
FHA Streamline : No Verification Of Job, Income, Credit
Another big plus is that the FHA Streamline Refinance is fairly easy for which to qualify. In a sweeping guideline update, in April 2011, the FHA abolished verification for practically everything on an FHA Streamline Refinance mortgage application. Now, as written in the FHA’s official mortgage guidelines, the mortgage approval process for an FHA Streamline Refinance says :
- Employment verification is not required with an FHA Streamline Refinance
- Income verification is not required with an FHA Streamline Refinance
- Credit score verification is not required with an FHA Streamline Refinance
Are You FHA Streamline Refinance Eligible?
Perfect, 12-Month Payment History Is Required
The FHA’s main goal is to reduce its overall loan pool risk. Therefore, it’s number one qualification standard is that homeowners using the Streamline Refinance program must have a perfect payment history stretching back 12 months. 30-day, 60-day, and 90-day lates are not allowed. Furthermore, loans must be current at the time of closing.
210-Day “Waiting Period” Between Refinances
The FHA requires that borrowers make 6 mortgage payments on their current FHA-insured loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance.
Employment And Income Are Not Verified
The FHA does not require verification of a borrower’s employment or annual income as part of the FHA Streamline process. There is no Verification of Employment, nor are there paystubs, W-2s or tax returns required for approval. You can be unemployed and get approved for a FHA Streamline Refinance so long as you still meet the other program requirements.
Credit Scores Are Not Verified
The FHA does not verify credit scores as part of the FHA Streamline Refinance program. Instead, it uses payment history as a gauge for future loan performance. This means that FICOs under 640, under 620, under 580, and under 500 are eligible for Streamline Refis.
The Refinance Must Have “Purpose”
Streamline Refinance applicants must demonstrate that there’s a Net Tangible Benefit in the refinance; a legitimate reason for refinancing. Loosely, Net Tangible Benefit is defined as reducing the (principal + interest + mortgage insurance) component of the mortgage payment by 5 percent or more. Another allowable Net Tangible Benefit is to refinance from an adjusting ARM into a fixed rate loan. Taking “cash out” to pay bills is not an allowable Net Tangible Benefit.
Loan Balances May Not Increase above the current FHA Loan Original Balance To Cover Loan Costs
Appraisals Not Required
The FHA isn’t concerned about home value — it’s insuring your loan regardless. Therefore, the FHA does not require appraisals for its Streamline Refinance program. Instead, it uses the original purchase price of your home, or the most recent appraised value, as its valuation point. Homes that are underwater are still FHA Streamline-eligible.
FHA Streamline Refinance Mortgage Insurance Requirements
The FHA Streamline Refinance is an FHA-insured mortgage, and FHA borrowers are required to make two types of mortgage insurance payments — an upfront mortgage insurance payment paid at closing, plus an annual one split into 12 installments, paid with your mortgage payment each month. With respect to mortgage insurance premiums, as of June 11, 2012, homeowners using the FHA Streamline Refinance program are split into two classes :
- Homeowners whose new loan replaces an FHA-backed mortgage endorsed before June 1, 2009
- Homeowners whose new loan replaces an FHA-backed mortgage endorsed on/after June 1, 2009.
FHA Streamline Refinance MIP Rates (For Loans Endorsed Before June 1, 2009)
If your existing FHA mortgage was endorsed prior to June 1, 2009, your mortgage insurance premiums have been “grandfathered”. You can refinance to the FHA Streamline Refinance program and pay reduced rates for both for upfront MIP and annual mortgage insurance premiums.
Upfront MIP (FHA Streamline Refinance)
Annual MIP (FHA Streamline Refinance)
Annual MIP is similarly cheap. For an FHA Streamline Refinance that replaces a FHA loan endorsed prior to June 1, 2009, the annual MIP is 0.55% annually, or 55 basis points. The complete annual MIP schedule is as follows :
- 15-year loan terms with loan-to-value over 90% : 0.55 percent annual MIP
- 15-year loan terms with loan-to-value under 90% : 0.55 percent annual MIP
- 30-year loan terms with loan-to-value over 95% : 0.55 percent annual MIP
- 30-year loan terms with loan-to-value under 95% : 0.55 percent annual MIP
FHA Streamline MIP For Loans Endorsed On/After June 1, 2009
If your existing FHA mortgage was endorsed on, or after, June 1, 2009, your new FHA mortgage insurance premiums are the same as for all other FHA mortgage applicants.
For an FHA Streamline Refinance that replaces a FHA loan endorsed on, or after, June 1, 2009, the annual MIP varies based on loan type and loan-to-value. The annual MIP schedule, for loans with case numbers assigned on, of after, June 1, 2009 :
- 15-year loan terms with loan-to-value over 90% : 0.60 percent annual MIP
- 15-year loan terms with loan-t0-value under 90% : 0.35 percent annual MIP
- 30-year loan terms with loan-to-value over 95% : 1.25 percent annual MIP
- 30-year loan terms with loan-to-value under 95% : 1.20 percent annual MIP
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