A Federal Housing Authority Streamline Refinancing loan offers existing FHA homeowners a chance to refinance their homes, often without an appraisal. In order to be eligible and approved for the loan, you must show there is a “net tangible benefit” to you as a result of the new loan. You must pay closing costs for your refinance.
Closing costs can include a loan origination fee that covers the lender's cost of obtaining financing and administration of your loan. The fee is usually calculated as a percentage of the loan amount, but it can also be a flat dollar amount. It may be described as an application fee or underwriting fee. Other fees, such as those for title searches and administrative fees, can bring closing costs to 3 percent of the loan amount. So if you’re taking out a $100,000 refinance loan, you might have as much as $3,000 in closing costs.
Paying for Closing Costs
Your closing costs and how you pay for them depend on if you get a no-appraisal streamline loan or opt to have your home re-appraised. You may also choose a “no cost” refinancing loan by taking on a slightly higher interest rate to have closing costs included into the loan. According to FHA rules, you can only roll the closing costs into your new FHA Streamline Refinancing loan if there’s enough equity in the property to cover the additional amount.
Before you can close on your refinance, you must meet eligibility requirements and get a new loan approved. According to HUD 4155.1 Chapter Six, Section C, the lender must determine that there is a net tangible benefit -- such as a 5 percent reduction to the principal and interest and mortgage insurance premium, or a change from an adjustable rate to a fixed rate. In addition, your mortgage must be in good standing. If you meet these requirements, you can expect less paperwork and a no-cash-out option.
When you do a Streamline Refinancing loan, you can have a non-credit qualifying loan, which forgoes a credit check -- provided you have made at least six payments on the FHA-insured mortgage being refinanced and at least 210 days have passed from the closing date of the original mortgage. A credit qualifying Streamline Refinancing must be considered when a change in the mortgage term will result in an increase in the mortgage payment of more than 20 percent. If you have a conventional loan and want to switch to an FHA loan, a credit check will be required.
Tracey Lamphere has more than 15 years of experience as a reporter and editor. She has contributed to Sound Publishing newspapers in Washington state. Lamphere also specializes in marketing communications and copywriting. She has a Bachelor of Science in business journalism from the University of North Texas.