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FHA Streamline Refinance

Updated May 02, 2023   |   9 mins read

For low- to moderate-income home buyers, FHA loans are a godsend. Because these loans are backed by the U.S. Federal Housing Administration, lenders can safely work with borrowers who would be ineligible for a conventional mortgage.

As your financial situation changes, though, you may be able to get a lower monthly payment as you pay off your home loan. An FHA streamline refinance could help you get it.

This guide will walk you through the details of an FHA streamline refinance: how it works, what type of borrower it’s best for, how to meet the requirements, and more. 

In this guide:

What is an FHA streamline refinance?

An FHA streamline refinance loan is a way to refinance an FHA loan into a new mortgage with better loan terms. It requires less paperwork and documentation than other refinance options, which makes the process easier.

Borrowers can use an FHA streamline refinance to get a lower monthly payment with an extended repayment term or a lower interest rate. Unlike conventional cash-out refinance loans, borrowers can’t cash out more than $500 from the refinance loan, no matter their current home equity ratio.

Pros & cons of the FHA streamline program


  • No home appraisal necessary: A borrower may request an appraisal if they like, but it’s not necessary. This can be beneficial if your home value is less than your mortgage balance.
  • No loan-to-value requirement: Lenders can’t require a certain LTV ratio before refinancing the loan. Borrowers whose house has dropped in value can still refinance their loan to get a better interest rate or monthly payment.
  • Faster process: Because the FHA streamline process requires fewer documents and less paperwork, borrowers don’t have to wait as long. This shorter process means they could get a cash boost sooner than with a conventional refinance loan.
  • Fewer credit and income requirements: Most conventional loan refinances require a minimum credit score or income. But as with FHA loan requirements, FHA streamline refinance requirements are more lenient. Lenders may not even ask to verify your credit history or income to approve the loan. 


  • Limited cash-out option: If you have a lot of equity in your home, you may want to cash out some to use for a home remodel, vacation, or other expense. FHA streamline mortgages don’t allow borrowers to cash out more than $500, but you could instead consider an FHA cash-out refinance.
  • Only available for FHA loan borrowers: You can’t refinance a conventional mortgage with an FHA streamline refinance. Borrowers can only refinance an FHA loan with this program.
  • Must have a net tangible benefit: Borrowers must prove they will see a 5% decrease in their monthly payment. If your interest rate is already low, it may be hard to achieve that 5% decrease. Borrowers with an adjustable-rate mortgage may be exempt from this rule if they refinance to a fixed-rate loan.
  • You have to pay upfront mortgage insurance premium again: Refinancing with an FHA streamline mortgage resets the mortgage, so you have to cover the 1.75% FHA MIP fee again. You may be able to roll this into the mortgage, but you’d pay interest on that amount.

FHA streamline refinance guidelines & requirements

There are some requirements the borrower must fulfill to be eligible for an FHA streamline refinance.

  • You must already have an FHA loan. You can’t refinance a conventional mortgage or other first-time home buyer loans, such as a USDA loan or loan from a VA lender.
  • The loan must be at least 210 days old with at least six months’ worth of payments made.
  • You must be current on your loan and can’t have had any late or missed payments in the last three months. There can only be one 30-day late payment in the previous six months.
  • There must be a net tangible benefit.

What is a net tangible benefit?

The net tangible benefit is a requirement for borrowers interested in an FHA streamline refinance. It means the new loan needs to be financially beneficial for the borrower. It almost always has to reduce your monthly payment by 5% or more through a lower interest rate or longer loan term. 

Borrowers with an adjustable-rate mortgage (ARM) may also qualify as long as you’re past the fixed-rate period. If you have a fixed-rate mortgage, you may refinance to a one-year ARM as long as the interest rate is two points less than the original fixed rate.

Your current mortgage lender may be able to show whether a streamline refinance will result in a net tangible benefit for your loan.

What’s not required by the FHA streamline program?   

The FHA streamline program doesn’t have any income requirements, which may be useful for borrowers whose salary has recently decreased.

Also, home appraisals are optional, meaning there’s no minimum home value or LTV requirement. Compare that with conventional refinance loans, which usually require the appraisal to meet a certain amount.

FHA streamline insurance requirements

When you took out an FHA loan, you had to pay an upfront mortgage insurance premium (MIP) that cost 1.75% of your mortgage. When you refinance your mortgage with an FHA streamline refinance, you have to pay that upfront fee again.

You may be able to get some of that fee refunded if you closed on the loan 36 months ago or less.

The refund amount ranges between 10% to 80% and decreases with every passing month. For example, a borrower who closed 12 months ago may receive a 58% refund, but someone who closed 24 months ago will only get 34%. 

Months since closingMIP refundMonths since closingMIP refundMonths since closingMIP refund

You won’t receive the refund as cash. Instead, it counts toward the new monthly MIP fee. If you put down at least 10% on the loan, you only have to pay MIP for 11 years.

Who does an FHA streamline refi make sense for?

An FHA streamline refinance makes the most sense for people who have less than 20% equity in their home. 

When you have more than 20% equity, you can refinance an FHA loan into a conventional mortgage. Your mortgage payments will likely be lower with this option because you won’t have to pay a monthly mortgage insurance premium.

Where to get an FHA streamline refinance loan

Many mortgage lenders are authorized to participate in the FHA streamline program, but our guide to the best FHA lenders is a good place to start your search.

Each lender can make its own streamline refinance offer. Some may provide a better deal on closing costs, while others will have a lower interest rate. You can find the best deal by shopping around and asking lenders to match the best offer.

You can aslo ask your current FHA lender if it can match an FHA streamline quote you receive. 

Also, remember to get quotes from multiple lenders within a two-week period to protect your credit score from multiple credit inquiries. 

Frequently asked questions