FHA Streamline Refinance is a mortgage refinance program HUD has permitted since the early 1980's. The "streamline" refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:
The mortgage to be refinanced must already be FHA insured
The mortgage to be refinanced should be current (not delinquent).
The refinance is to result in a lowering of the borrower's monthly principal and interest payments.
No cash may be taken out on mortgages refinanced using the streamline refinance process.
We offer streamline refinances in several ways. We offer "no cost" refinances (actually, no out-of-pocket expenses to the borrower) by offering a higher rate of interest on the new loan (but still lower than your existing mortgage) than if the closing costs were in cash or financed. Instead of financing the costs into the loan, you are financing them into the interest rate. From this premium, the investor credits most or all of the closing costs that are incurred on the streamline mortgage refinance.
You may also streamline refinance and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by a FHA appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed what is currently owed, i.e., closing costs may not be added to the new mortgage with those costs either be paid in cash or through the premium rate as described above.
Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal and, thus, closing costs may not be included in the new mortgage amount. The new loan amount cannot exceed the maximum loan amount for the type of property and the area it is located in.