Skip to content
Home » Blog » Expert Advice » FHA Streamline Refinance – What’s the Catch?

FHA Streamline Refinance – What’s the Catch?

I know that sometimes FHA home loans get a bad rap because of the mortgage insurance premium, but there are benefits that go far beyond that of simply being easier to qualify.

FHA home loans have a built in benefit of allowing you to reduce the interest without having to go through the expense and paperwork of the entire home loan process again.

I know, I know…I’m usually the first one to call B.S. when something sounds too good to be true – so I want to make sure I emphasize that it is a much easier process, but of course there is still a little bit of paperwork.

Find the Right Lender. Find the Right Loan. Get Help Now!

What’s the Catch?

That’s just it – there really isn’t one.  There are a couple of things you should be aware of though.

No Cost Streamline – There are minimal costs to doing a FHA streamline refinance that the lender will pay for.  The way the lender pays for these fees is by offering you an interest rate sufficient to “cover the cost”.

Example:  If you currently have a 4% interest rate, a lender may be able to offer you a “no cost streamline” at 3.25%.  That’s pretty good right?  Should save you a ton over the long haul.

The reality of this scenario is that if you were to come in with the reduced fees associated with a streamline, you may be able to push that interest rate down under 4%.  Pretty cool huh?

Find the Right Lender. Find the Right Loan. Get Help Now!

Paperwork Required for a FHA Streamline Refinance

  • Loan Application – This is the same application you completed last time you applied for a loan
  • Mortgage payment coupon/statement – Your most recent mortgage statement
  • Homeowner’s insurance declaration page or agent’s contact information
  • Copy of Driver’s and Social Security card

That’s not bad, right?  Most importantly is what you DO NOT have with a FHA streamline refinance…..No Appraisal!

I am sure there are many lenders out there bombarding you with refinancing opportunities, it’s annoying – I totally get that.  Just don’t let that discourage you from looking into this option if you have a lender you can trust.

Find the Right Lender. Find the Right Loan. Get Help Now!

If you’re in California, I’m happy to run the numbers to see if you can save a few bucks.  If you’re outside California, drop me a quick comment below and I may be able to recommend someone I trust.

The bottom line on this is that there’s no cost to explore this opportunity and if you cannot realize at least a 5% improvement in payment, FHA will not allow you to refinance.  Win/Win.

About Your Expert

Scott Schang

A 20 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

Leave a Question or Comment About this Topic

  • Coral Johnson says:

    I just received a letter called the loan benefit statement offering to get my mortgage down from 1800 to 1200. It sounded too good to be true. my interest rate is 3.076. it is called a fha streamline benefit. Can you let me know what this is and is this something I would want to do? The letter says I have until july 21 2017 to respond.

    • Scott Schang says:

      Hi Coral,

      What you received is junk mail that many other people get too. These companies only know that you have an FHA loan now, and they are create borderline “deceptive” letters that make it look official.

      If your interest rate is lower than 4.25% right now, you would not be eligible for a FHA streamline refinance. You must lower your rate by .50% to be eligible.

      You have an AMAZING interest rate. Other than removing mortgage insurance in the future, there is no reason for you to consider refinancing this loan.

      Hope this helps?

  • ScottSchang says:

    tracy53821 Hi Tracy, I can’t imagine why they wouldn’t be able to do a FHA streamline refinance.  Shoot me an email to scott@findmywayhome.com and I can introduce you to someone that can help!

  • tracy53821 says:

    Hey Scott, looking to do a FHA streamline in Texas. My mortgage is with a company is  in Oklahoma, and say they can not help me.(i think it is because I am at 6%, and they  want to keep that….) Please help!
    Tracy

  • ScottSchang says:

    Jason Ingman ScottSchang Excellent work Jason!  Thank you for posting!

  • Jason Ingman says:

    I found the answer on the HUD website: 

    Is a partial claim
    paid off at the time of an FHA Streamline Refinance transaction? 
    An FHA-insured loan with a Partial Claim (as evidenced by a second lien)
    may be eligible for an FHA streamline refinance transaction because FHA will
    accept subordination of Partial Claim promissory notes, provided that the
    current lien position for those notes remains the same. 
    Partial Claims do not have
    to be paid off at the time of an FHA Streamline Refinance transaction.  (See
    Mortgagee Letter 2013-16) 
    Subordination documents are to be sent to HUD’s Secretary-Held Assets Servicing
    Contractor.

  • Jason Ingman says:

    ScottSchang Jason Ingman  I found the answer on the HUD website: 

    Is a partial claim paid off at the time of an FHA Streamline Refinance transaction? 
    An FHA-insured loan with a Partial Claim (as evidenced by a second lien) may be eligible for an FHA streamline refinance transaction because FHA will accept subordination of Partial Claim promissory notes, provided that the current lien position for those notes remains the same.
    Partial Claims do not have to be paid off at the time of an FHA Streamline Refinance transaction. (See Mortgagee Letter 2013-16)
    Subordination documents are to be sent to HUD’s Secretary-Held Assets Servicing Contractor.

  • ScottSchang says:

    Jason Ingman This is a very good question Jason!  I have not encountered this specific challenge yet.  Is your lender giving you any guidance?  Let me do some research and get back to you tomorrow?

  • Jason Ingman says:

    I purchased my home in Apr 2008 with an FHA loan and 3.5% down. In 2012, I went through the FHA-HAMP loan modification process which reduced my rate to 4.625%, but also moved $35,000 via a HAMP partial claim into an interest-free “silent second” loan, due upon pay off of my modified FHA mortgage.

    I am now attempting to re-finance my current FHA mortgage via the FHA Streamline process to a lower interest rate. Will I be required to include the balance of the “silent second” loan into the refinance; or, will I be allowed leave the silent “second out” of the refinance and pay the silent second loan off once my new re-financed FHA loan is paid in full?

    Thanks in advance for your assistance.

  • Johanna says:

    Hi Scott,

    We currently have a loan through CalHFA with a subordinate second that is now underwater. We have been told that CalHFA will not work to refinance in anyway. Do you know anything about the HFA working with CalHFA to offer the streamlined refinance? We bought our home in 2008 at a rate around 5.25.

    • Scott Schang says:

      CalHFA does consider subordination if there is currently a hardship. It’s been much more difficult in the past, but it seems that they are trying to be more lenient recently.

      Examples of hardships are reduction in income or reduction of savings. Can you make a case for either of these?

      It’s not going to be simple and it’s not impossible either. If you would like a second opinion, shoot me an email to scott@findmywayhome.com with the best time and number to reach you.

      We are a direct lender with CalHFA and work with them quite often.

  • >
    %d bloggers like this: