About the FHA Streamline Rate Reduction Program
The Federal Housing Administration's Streamline rate-reduction program allows lenders to expedite their underwriting decisions to quickly provide eligible homeowners with FHA refinancing. Using a streamlined process allows owners to reduce interest rates and pay less in closing costs.
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Ownership Requirement
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The FHA-refinanced property must have previously been FHA-insured. You must also be currently employed.
Payment History
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You must have made six monthly payments or more and have established an on-time payment history. Furthermore, payments must have been timely for at least three months before refinancing.
If you have lived in your house for at least one year, then you are given only one late-fee exception. However, if you've lived in your home for less than a year, you must have made every payment on time. There are no exceptions to this rule.
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Benefits
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If the lender pays the owner's refinancing fees, then another appraisal is unnecessary. The FHA also doesn't require another termite inspection.
Loan Size
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Your newly refinanced loan payment should be lower than your current mortgage payment (usually by 5 percent or less). The FHA also has stringent regulations for owners switching between loan products (such as changing from adjustable-rate loans to fixed-term loans, or the reverse). In such cases, the FHA requires lenders to ensure that owners have at least an 80/20 equity split (equity at 20 percent of the loan).
Low Cash-out Settlement
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The FHA does not allow owners to receive a significant amount of cash at settlement. Typically, cash-out is capped at $500, unless there is a significant amount of equity built up in the property (more than 20 percent). If you would like cash back, an appraisal is necessary.
Warning
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Since this is general information for educational purposes, and real estate laws can change, the information should not be used as a substitute for competent legal advice from a licensed attorney in your state.
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References
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