What Is an FHA Streamline?
An FHA Streamline is the fancy term for refinancing an FHA Loan. It is referred to as a streamline because, as the name implies, the process is typically much quicker and smoother than the process would be for getting a standard refinance loan. The reason the process is streamlined is because the refinance lender simply relies on all of the credit, employment and financial verification information from the original FHA loan application. New credit check, income verification and appraisal are not required.
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How Is This Possible?
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An FHA Streamline almost sounds too good to be true, but it isn't. To understand how and why an FHA Streamline works, you must understand how an original FHA Loan works. The FHA Streamline is possible because it just reprocesses the original FHA Loan.
FHA Basics
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An FHA Loan is a mortgage that is guaranteed by the U.S. Department of Housing and Urban Development (HUD). In other words, HUD tells the lender that if you, the borrower, default on the mortgage loan, then HUD will step in and pay the lender for any losses that they otherwise would have suffered. The lender has less risk because HUD guarantees the loan. Because of the reduced risk, lenders are more willing to loan money at a lower interest rate.
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FHA Streamline Basics
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An FHA Streamline is simply a refinance loan that is, once again, guaranteed by HUD. Mercifully, HUD regulations provide that an FHA Streamline loan can be guaranteed based on the borrower's qualifications under the original FHA Loan. In other words, because the borrower qualified for an FHA Loan the first time around, HUD will guarantee the loan the second time around based on that first qualification. The refinance application, then, is mostly just a copy and paste from the original FHA Loan application.
Application
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Technically, yes, a formal application is still required on an FHA Streamline loan. The application, however, is based on all of your past information used on the original FHA Loan, so the application is a mere formality. This means that a new appraisal is not required, the lender will not run a new credit check, and you will not be required to provide proof of income (although, some lenders will verify that you are still employed, but this is nothing more than a mere phone call to your employer).
To Qualify
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The only real qualification for an FHA Streamline is that a borrower must not have been late on any mortgage payments within the last 12 months. As long as you have paid your mortgage on time during the last year, you should have no problem qualifying for an FHA Streamline because you already met FHA requirements when you got your original FHA Loan.
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