FHA Streamline Refinance

DEFINITION of 'FHA Streamline Refinance'

A mortgage-refinancing option offered by the Federal Housing Administration (FHA). An FHA streamline refinance requires the mortgage to be FHA insured and not delinquent. The refinance must result in a reduction in the homeowner’s interest and principal payment, and no cash can be taken out of the refinanced mortgage. There are two forms of this refinance available: non-credit qualifying and credit qualifying.

BREAKING DOWN 'FHA Streamline Refinance'

The FHA does not require an appraisal on a streamline refinance and instead uses the homeowner’s initial purchase price. It also does not require a credit report for non-credit qualifying streamline refinances. A credit report is required for credit qualifying streamline refinances. Despite this, the lender might ask for a credit report as a part of its own policy. 

Non-credit qualifying refinancing is available to homeowners who have owned the property for at least six months, and the refinance must take place at least 210 days after the closing date of the original mortgage. 

The FHA began allowing streamlined refinancing for insured mortgages in the 1980s. The words “streamline refinance” actually refer to the reduced amount of paperwork and underwriting that the lenders must deal with.

Lenders involved with this FHA refinancing program offer a number of payment options. A “no cost” option charges the borrower no out-of-pocket expenses, but carries a higher interest rate than if the borrower paid closing costs in cash. The new mortgage amount is not permitted to include closing costs.