Professional Documents
Culture Documents
What Is An FHA Streamline Refinance
What Is An FHA Streamline Refinance
By Michele Lerner
2 Comments
3211122 Share
Loading Results...
Your current mortgage must be FHA-insured.
You must have made on-time, in-full mortgage payments for the past 12 months.
Your FICO credit score has to be at least 620 or higher. Some lenders require a credit score of
640 or 680 on an FHA loan.
You cannot have refinanced within the past 210 days.
If you meet these guidelines, you can contact your current mortgage lender to inquire about a
streamline refinance. You can also contact other mortgage lenders to compare rates and fees.
Different lenders have different loan requirements, so even if one lender turns you down, another
may be willing to work with you.
In addition to various individual mortgage lender requirements, you need to meet the FHA “net
tangible benefit” requirement, which says that refinancing will either help you avoid future mortgage
rate increases (refinancing from an adjustable rate mortgage to a fixed-rate mortgage works for this)
or will reduce your total monthly payment – including principal, interest, and mortgage insurance –
by at least 5%. The interest rate doesn’t have to drop by 5% – just your payment.
That can be a catch for many homeowners, because even though you have been paying mortgage
insurance premiums with an FHA loan, you need to continue paying them with a refinance.
Depending on when you took out your current mortgage, those mortgage insurance premiums could
be higher on your new loan and erase any payment reduction achieved with a lower interest rate.
FHA Mortgage Insurance
How much you’ll pay in mortgage insurance depends on when you closed on your current mortgage.
As of June 11, 2012, the FHA offers reduced upfront mortgage insurance premiums to borrowers
who took out their current mortgage prior to June 1, 2009. Those borrowers must pay 0.01% of the
loan amount.
If you took out your current loan on or after June 1, 2009, you’ll pay a higher upfront mortgage
insurance premium of 1.75%. That’s a whopping difference from $10 to $1,750 on a $100,000
mortgage. The upfront mortgage insurance premium can be added to your loan balance.
As you already know if you have an FHA loan, you have to pay both an upfront mortgage insurance
premium and an annual mortgage insurance premium. However, the annual mortgage insurance
premium is eliminated if your loan-to-value (LTV) is 78% or less.
Here’s the breakdown on annual mortgage insurance premiums: If you are refinancing a loan taken
out before June 1, 2009, your annual mortgage insurance premium will be 0.55%. If you are
refinancing an FHA loan taken out more recently, you will need to pay 1.25% of the loan amount.
The annual mortgage insurance premium on a $100,000 mortgage would be $550 at the lower rate
compared to $1,250 at the higher rate. These premiums are paid on a monthly basis, so on a
$100,000 loan you would pay $58 more per month at the higher mortgage insurance rate.