For the longest time, credit scores were not even a consideration on FHA Streamlines.

What about now?

While FHA still has no minimum credit requirements per the HUD guidelines, most if not all lenders are verifying credit scores. There are minimum score requirements as well as “adjustments” for scores under a certain level.  Unfortunately, every lender sets their rules a bit differently, but there is some general consensus among the industry.

Scores above 700- No issue

660-699- possible minor adjustments to rate.

600-659- possible major adjustments to rate and/or denial of approval.

Below 600- Not likely to be approved.

If you’ve been turned down because of your credit score, you may want to consider becoming an expert on your credit report.  We estimate that about 30-40% of credit reports have errors on them, and errors are the easiest to be removed. You can get a free copy of your credit report from just about anywhere online these days. Simply review it, make notes of the things that are incorrect and file a dispute with each of the 3 credit bureaus.  It is easier said than done, but a task that most should be able to do on their own.

Quite simply, it’s a program developed by FHA to allow FHA mortgage holders to refinance without all of the normal hassles in obtaining a standard or conventional refinance. It’s been around for about 25 years and has varied in popularity as much as the Billboard top 20 hits over that same time period. Some of its unique identifiers are as follows;

• No appraisal required. A huge help in today’s real estate environment.
• No income qualifications, no debt to income ratios, no pay stubs or tax returns. ONLY verification that you do have a source of income.

Who Qualifies for an FHA Streamline Refinance?

Well that answer is simple. Most FHA loan holders will fit the minimum qualification standards, but each lender may add any additional qualifications as they see fit. Many will require a minimum credit score. Some will run you back through the ringer completely and still call it a streamline. I just HATE that.

How easy is the FHA streamline process?

The general rule is that it should take about 25% of the normal “work” of a conventional refinance or a purchase loan. It’s about 75% less documentation, 75% less phone calls, faxes, and emails, but you will still have to send a few things in and sign a few documents. They can be done in as little as 10 days start to finish, but I must also mention in fairness that much of the industry works in an orderly fashion on a first come, first serve basis and sometimes that slows it down.

When do you need to streamline your FHA loan?

FHA rates vary from day to day, month to month, and year to year. If FHA rates are somewhat lower today than they were when you closed on your last loan, you will most likely benefit from an FHA streamline refi. Another thing to consider is that your personal circumstances and/or mortgage guidelines may have affected your rate when you closed your last loan. If there’s one thing we all know for sure, it’s that guidelines and circumstances change often so…….. Trust me, It’s worth keeping up to date on because you never know when you’ll become a great candidate for the FHA Streamline refinance program.

Who offers the FHA Streamline Refinance?

Technically, it can be offered by any lender, but some just do it better than others. Some are better at the paperwork. Some really WANT streamlines while others will do them if they must. Others may not be experienced in it while those with the most experience may be on a 5 month backlog. It’s just too hard to say, but here are some things to watch out for.

1. Application fees. The most absurd thing to hit the fha streamline market, EVER. A qualified individual will be able to give you a good rundown on your options as well as get you some paperwork to get started for FREE. There is absolutely no reason to pay an application fee, ever. No reputable seller of anything needs to charge some random absurd amount of money just to get the ball rolling. Many institutions have gone this route as it provides yet another source of income. Make no mistake they are trained to talk you out of that application fee, and they are good at it.
2. Appraisals. Except in fairly rare circumstances, appraisals are not needed for streamline refi’s. If someone is pushing you for an appraisal, it’s usually for one of two reasons. They either have no clue what they are doing, or they are hoping the appraisal will come in higher so that they can charge more in fees.

What does the typical FHA streamline refinance cost?

This is the trickiest part of all. You may have seen advertisements of “FREE”, “no cost”, “no out of pocket”, or “low cost” loans, and although you’ve never seen it advertised there have been lots of “higher cost” streamline refinances too. Huh? What? Do you have a headache yet? The short answer to the question is…… It depends. There have been MANY FHA streamlines done at no cost at all, none up front, none at the end, and none in the middle, NONE. Conversely there have been many FHA streamlines closed with entirely too much costs. Most transactions will fit somewhere in the middle. The dollar amount of your costs depends on several factors including but not limited to; your location, how much you’ve already paid in premiums to FHA, and of course your target rate. The only way to know for sure is to speak to someone for a quote. Here’s a good simple way to evaluate an FHA streamline refinance transaction. It’s easy, takes very little math skills and fits on the back of a napkin.

1. Ask how much your loan amount will be. In Total. _________________
2. Ask what the interest rate will be, and is it fixed or adjustable? _______
3. Ask what the payment will be, and does that include escrow? ________
4. And finally, ask how much you will have to pay at closing____________

Asking those 4 questions can help you wade through the miserably long pile of documents and make a reasonably well informed decision without getting caught up in the catch phrases like points, fees, impounds, charges, apr’s, prepaids, doc fees, recording fees, etc, etc. It’s really the simplest way to evaluate an FHA streamline refinance. If you take anything away from this article, it should be the above four points of analysis.

Feel free to contact us about anything in this article or anything about the fha streamline refinance program in general. We look forward to hearing from you.

An FHA Streamline, FHA RATE reduction, and IRRL are all categorized by the same characteristics.

• No Appraisal Required
• No income, or debt to income requirements.
• No credit qualifications. * See article on CREDIT SCORES
• No bank statements
• No tax returns, W2’s or 1099’s
• No inspections

Mostly  these benefits result in much less headache, less time, and less paperwork, usually making it cheaper than other forms of refinancing, but be careful there are still a few predatory lenders out there!

The Up Front Mortgage Insurance Premium (UFMIP, or just MIP) is collected at closing.  It has ranged in cost from 2.25% to as little as 1%, which is where it still sits today.  MIP Calendar

Do I have to pay it again when I streamline my FHA Mortgage?  Yes, and no, or maybe a little. Huh?

Depending on when you obtained your last loan, you may be eligible for a partial refund of what you’ve already paid. The refund period is currently 3 years. Within the last 3 years, the upfront premium has varied greatly. If you have paid more than the current 1% your refund may very well cover MOST or even ALL of your new up front premium.

What about my monthly mortgage insurance? Yes, it’s still a requirement and as a side note it has also changed greatly in the last 3 years, from a low of .5% to as much as 1.15% annually.  It’s currently on a tiered system that has a slight variation based on the down payment.  Many are already at this higher level.

What does all that it mean when I take advantage of the FHA streamline program?  Well, it means you will be paying the same, or more in monthly mortgage insurance premiums, sometimes even a lot more, and certainly not any less.  Yes, it may eat into your savings, so much in fact that you may not be able to take advantage of the program at all.  HOWEVER, I would encourage you to consider the following:

Your interest rate won’t change for the entire life of the loan, but your mortgage insurance will.

It decreases a slight amount each year and at some point, you will be able to have your mortgage insurance removed completely.  It would be a shame to miss out on a 30 year fixed interest rate at 3.xx% over $40 worth of mortgage insurance.   Short term thinking is what caused all these changes. Don’t let it cloud your judgment.

HUD has changed the MIP factors several times in recent years.  The following applies to FHA loans with 30 year terms, actually any term greater than 15 years.

Effective 4/5/2010

Up front premium changed to 2.25% of the base loan amount.

Annual premium for loans less than or equal to 95% LTV (Loan to Value)  -  0.50%

Annual premium for loans greater than 95% LTV  –   0.55%

See full details…….. FHA MIP CHANGES April 2010

Effective 10/4/2010

Up front premium changed to 1% of the base loan amount

Annual Premium for loans less than or equal to 95% LTV  -   0.85%

Annual premiums for loans greater than 95% LTV  -  0.90%

See full details……. FHA MIP CHANGES October 2010

Effective 4/18/2011

Up front premium remains at 1%

Annual premium for loans less than or equal to 95% LTV  -  1.10%

Annual premium for loans greater than 95% LTV  -  1.15%

See full details….. FHA MIP CHANGES April 2011