January 10, 2013
FHA Streamline loans are described in the official rules (HUD 4155.1) as follows:
“Streamline refinances
• are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage, and
• must involve no cash back to the borrower, except for minor adjustments at closing, not to exceed $500.”
The no-cash-out rule makes FHA Streamline Refinance loans different than cash-out refinances. Streamline loans may be done with or without an appraisal. According to FHA loan rules, when a Streamline Refinance is done without an appraisal, the following applies:
“Generally, the streamline refinance mortgage amount may never exceed the statutory limits, except by the amount of any new upfront mortgage insurance premium (UFMIP). However, the maximum mortgage may exceed the statutory limits on certain specialty products.”
Additionally, there are FHA loan rules that govern the term of the refinance loan. “The streamline refinance mortgage term is the lesser of
• 30 years, or
• the remaining term of the mortgage plus 12 years.”
Many borrowers want to know if mortgage insurance factors into the maximum loan–this issue is touched on above but is further clarified in the rules as follows:
“The maximum insurable mortgage for streamline refinances without an appraisal cannot exceed the outstanding principal balance
• minus the applicable refund of the UFMIP,
• plus the new UFMIP that will be charged on the refinance.”
The FHA adds that the outstanding principal balance, “may include interest charged by the servicing lender when the payoff is not received on the first day of the month, but may not include delinquent interest, late charges or escrow shortages.” The FHA also makes provisions for subordinate liens–the rules include this guidance:
“A subordinate lien, including a Home Equity Line of Credit (HELOC), regardless of when taken, may remain outstanding, but the entire lien must be subordinated at refinance. ”
Do you have questions about FHA home loans or refinancing loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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