You can't be delinquent on your current FHA loan. The rules differ for credit-qualifying and non-credit qualifying streamline refinances, but bottom line, you need to have a history of on-time mortgage payments.
It's not an FHA cash-out refinance. That wiggle room is there to accommodate changes that might be made at closing. It must be at least six months since your current mortgage was issued. Exceptions can be made for credit-qualifying streamline refinances where changes need to be made due to life changes like divorce or inheritance.
You will have to pay closing costs. The streamline refinance must result in a "net tangible benefit" to the borrower.
That means the FHA is looking for you to reduce your term or lower your mortgage interest rate — or both. Using a mortgage refinance calculator can help you understand the financial trade-off between lowering your payment and adding years to your loan term.
The added costs of interest compounded over an additional number of years can significantly outweigh the advantages of a lower monthly payment. While the FHA allows borrowers to increase their loan term by up to 12 years, it has to be offset by a rate reduction. One potential downside to an FHA streamline refinance: You'll pay a fresh upfront mortgage-insurance premium and continue shelling out monthly premium payments. The upfront premium is 1. In an FHA streamline refinance, you can wrap the upfront mortgage insurance premium — but no other closing costs — into a higher loan amount as a part of the refinance.
The biggest drawbacks of a streamline refinance are having to pay the mortgage insurance premiums and closing costs. Some lenders may offer a no-closing cost loan but this could actually end up costing you more in the long run so you should consider it carefully. Your best bet is to look into your refinancing options before making a decision.
Doing a little research beforehand could save you thousands of dollars later on. Update : Have more financial questions? SmartAsset can help. So many people reached out to us looking for tax and long-term financial planning help, we started our own matching service to help you find a financial advisor. The SmartAdvisor matching tool can help you find a person to work with to meet your needs. Then the program will narrow down your options from thousands of advisors to up to three fiduciaries who suit your needs.
Like all refinance programs, there are advantages and disadvantages to a streamline refinance through the FHA. While you can use your current FHA lender, it pays to shop around , as loan requirements and fees vary from one lender to another.
These can vary by lender, but here are the basics to keep on file:. When shopping around, remember that there are costs associated with this type of refinance. FHA loans originated before June require an upfront premium of only 0.
All other loans require an upfront premium of 1. Annual premiums are equal to 0. Along with MIP, your lender might also charge closing costs. Instead of closing costs, lenders charge a higher interest rate on the new loan. Of course, you also have the option of paying closing costs in cash. You can use a mortgage refinance calculator to see how lowering your rate and increasing your loan term would impact your financial situation.
How We Make Money. Mitch Strohm. Written by. Edited By Suzanne De Vita. Edited by. Suzanne De Vita. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity. Key Principles We value your trust. Bankrate Logo Insurance Disclosure. How does an FHA streamline refinance work?
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