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FHA Streamline Loans Are Great, But Are They Great For You?

An FHA streamline is a refinance of your existing FHA loan.  It is streamlined because it is a quick and easy way to get a lower interest rate without all of the hassle.  How does it compare to a traditional refinance?  Well, the biggest advantage is that the process is much quicker and easier.  With a FHA streamline refinance, there is no income documentation or credit check requirement.  That in itself makes the loan easier to get and quicker to process.  There is also no requirement for an appraisal.  This saves a lot of time and money, since you as the borrower will not need to pay for an appraisal.  However, your loan must already be FHA insured.

However, these benefits come, of course, with a few stipulations. If any of the following applies to you, you may want to look at other forms of refinancing

  • You are behind on your payments.  One of the requirements of this program is that you are not delinquent on your current FHA mortgage.  However, there are other programs that can help you if you do find yourself behind. 
  • You need cash.  The FHA streamline refinance does not allow for cash out of more than $500.  If you are looking to make home repairs or pay off other debts, you will need to go with another type of refinancing.  Also, you cannot increase the loan amount to cover closing costs.  You will need to pay these cost on your own.
  • The refinance will not reduce your term or lower your interest rate.  Every borrower's situation is different.  You will need to look at your current mortgage interest rate and the amount of time you have left on your mortgage.  The requirement is that there is a net benefit to you as a borrower, not just a lower monthly payment. For example, if you are lowering your monthly payment by increasing the term of your mortgage, you would end up paying more over the term of the loan.  This would not be a net benefit.

The bottom line is that although there are many benefits to a FHA streamline refinance, every borrower is different and has different needs.  It is best to comparison shop before deciding which type of loan to take on and also which lender to use.  This will ensure you are receiving the best benefit from whichever type of refinancing you choose.