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What is an FHA Streamline Loan?

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An FHA Streamline loan is a popular type of mortgage loan that people use to refinance their homes. FHA Streamlines are designed to help homeowners lower their interest rates, payments, and/or length of their mortgage terms. The FHA Streamline loan is a popular choice among refinancing homeowners because they tend to process and close more quickly than some other loan types. This type of loan is available for homeowners who already have FHA loans. Basically put, an FHA Streamline loan takes an existing FHA loan and replaces it with another FHA loan with more favorable terms that would financially benefit the homeowner.

FHA Streamline Loan Benefits

Most FHA Streamline loans process and close in 30 days or less because they typically require less paperwork than many other loan types, which makes them an attractive option for those who are looking for straightforward savings. 

These types of FHA refinance loans are made available to homeowners with less than perfect credit. Those with lower credit scores may still be eligible to refinance their homes with an FHA Streamline loan. 

In order to qualify for an FHA Streamline loan, a homeowner must be able to obtain either a lower interest rate or shorter loan term (which usually comes with a lower interest rate anyway). In other words, they have to prove that there is a tangible financial benefit to replacing the current FHA loan with a different one–whether that savings comes in the form of a lower monthly payment or a reduction in the amount of total interest paid over the life of the FHA loan. 

Another great benefit of an FHA Streamline loan is that they usually do not require the homeowner to obtain an appraisal on the property. This is one of the reasons the loans process quickly in most cases. FHA Streamline loans consider only the appraisal of the home at the time the existing FHA loan was taken out, whether or not the home as appreciated or depreciated in value. 

In addition to reducing monthly payments or total interest paid, an additional benefit of FHA Streamline loans is that when the Mortgage Insurance Premium, or MIP, rate that applies to FHA loans is reduced by the Federal Housing Administration, homeowners can take advantage of the lower MIP payment requirements or even eliminate their MIP payments altogether (depending on how much equity they have in their homes at the time they refinance). 

Other Things to Know About FHA Streamline Loans

One of the most important things to know about FHA Streamlines is that they do not allow for the homeowner to take cash out of their existing equity. FHA Streamline loans are designed solely to lower the homeowner’s interest rate or mortgage term and provide savings. Homeowners who are interested in taking cash out from their equity while refinancing their FHA loans can still do so, but they won’t be eligible for the FHA Streamline product. Instead, they’ll want to request and FHA refinance with cash out. 

In addition, homeowners who do not currently have FHA loans cannot utilize FHA Streamline loans. While you can refinance into an FHA loan from any other mortgage loan type, only homeowners who currently have FHA loans are eligible for an FHA Streamline loan. Those who currently have other loan types can refinance into an FHA loan, but they will likely need to obtain an appraisal and will not be eligible for the “expedited” nature of an FHA Streamline loan. 

Interested in an FHA Streamline Loan? Call NLC Loans. 

If you would like to explore your FHA Streamline loan refinancing options, call an NLC Loans Personal Mortgage Advisor toll-free at 1-877-480-8050 today to discuss your options.