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Streamline FHA Refinance: 5 Things You Should Know

By Barbara Marquand
Mortgage Credit Problems Columnist


Refinancing your mortgage with a minimum of hassle sounds like a dream in today's sluggish housing and tight credit markets.

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But you can refinance without an appraisal or credit check if you have an FHA mortgage, have owned the home for at least six months, and have been diligent about keeping up with the payments. The process is called a streamline refinance, a mechanism the Federal Housing Administration has permitted since the early 1980s. Here are the 5 key things you need to know:

1. The Basic FHA Loan Rules for Streamline Refinance

  • Your existing mortgage must be FHA-insured.
  • Your mortgage can't be delinquent; you must be current on payments.
  • Refinancing should result in a lowering of your monthly mortgage payment.
  • You can't take any cash out in the deal.

2. Streamline FHA Refinance Doesn't Mean Cost-Free

You might hear lenders tout "no-cost" refinancing, but that only means you pay no money out of pocket for the new loan. Lenders that advertise these deals charge a higher interest rate to pay for the costs. You get lower FHA rates by paying the closing costs in cash.

3. FHA Refinance: When Is Appraisal Needed?

The new loan amount must be no more than the original loan to avoid an appraisal requirement. Lenders can include the closing costs into the new loan amount, but only if an appraisal shows you have enough equity in the property.

4. Credit Check for FHA Refinance

The FHA requires lenders to review your credit history if the mortgage is less than six months old or a change in the mortgage term, such as going from 30 years to 15 years, would result in a 20% or more increase in the mortgage payment.

5. On-Time FHA Mortgage Payments a Must

You must have made all your payments on time if your FHA mortgage is less than a year old, or been no more than 30 days late in the last year and on time in the last three months if your mortgage is more than a year old.

Shop with several lenders for FHA mortgage rates when seeking refinancing. You can get up to four free quotes for FHA home loans by filling in the information on this page. Compare rates as well as closing costs to decide where to do business.

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