FHA Streamline Refinance

May 5th, 2009

The easiest way to get a loan, with no income documentation, no appraisal and no credit check. Everything you should know about FHA Streamline refinance.
By Andre Plessis

About the FHA
The Federal Housing Administration (FHA), an agency of the federal government, insures private loans that are issued for new and existing housing, and loans that are approved for home repairs. Created by congress in 1934, the FHA became part of the Department of Housing and Urban Development's Office of Housing (HUD) in 1965.

For FHA homeowners, there are three major reasons why the streamline refinance program can be superior to a conventional mortgage refinance.

1. The FHA won't approve your refinance unless the new mortgage payment is less than your current one
2. The FHA doesn't ask for an appraisal of your home and doesn't care if you're underwater
3. If you've had your loan less than five years, the FHA refunds a portion of your original closing costs directly to your bottom-line

There are other differences between an FHA Streamline Refinance and a conventional mortgage refinance. First, FHA Streamline refinances don't require proof of income from the homeowner. You do not need to provide any paystubs, W-2 statements, or tax returns.  Instead, the homeowner must just prove that he's still employed.

One phone call to your current employer will accomplish that.

This "No Income Verification" nature of an FHA Streamline Refinance is in keeping with the FHA's over-riding philosophy that homeowners making payments at a higher mortgage rate should obviously be able to make payments at a lower mortgage rate.

It's the same for the "no appraisal" requirement.  Unlike conforming mortgages that are securitized and sold via Wall Street, the Federal Housing Authority is the only insurer and guarantor of FHA home loans.  Because of this, the FHA isn't concerned about whether its borrowers' home lose value it's on the hook for the loan either way. 

The FHA is more concerned about helping FHA homeowners get payment relief because it knows lower housing payment makes default less likely in the long-term.

However, getting approved for an FHA Streamline Refinance isn't easy.

1. Homeowners must be current on their mortgage payments.  No 30-day, 60-day, or 90-day delinquencies are allowed from the last 12 months.
2. Homeowners must have at least 6 months of history paying on their current mortgage. 
3. The new loan size can't exceed the original size of the FHA loan being replaced.
4. As of May 2009, the most common minimum credit score for an FHA Streamline Refinance is 620.