There are four basic requirements for securing a FHA Streamline loan. Those four requirements are:
– Your existing loan must already be insured by the Federal Housing Administration (FHA).
– Payments on your existing FHA loan must be current with no delinquencies in the last year.
– Refinancing your current FHA loan should result in the lowering of your monthly principal and interest payments. Under certain circumstances, you may be eligible for an FHA Streamline refinance if you are converting from an adjustable rate mortgage (ARM) to a fixed-rate mortgage.
– “Cash-outs,” the practice of taking cash out when you refinance, are not allowed on an FHA Streamline refinance loan.
To refinance, you must use an FHA-approved lender. All closing costs must be paid upfront. “No-cost” loans are available, but result in a higher interest rate.
You may choose to include the closing costs into your loan, but this requires an appraisal which will determine if you have sufficient equity in your home to cover the amount. If you don’t have sufficient equity in your home or your home is worth less than the loan amount (“underwater”), you would not be eligible for this option.