More and more homeowners who received mortgage through the Federal Housing Administration (FHA) program have sought to refinance to take advantage of the low FHA rates. These rates, which are now in the low 3 percent, can allow homeowners to significantly reduce their monthly payments. In the first three months of 2015, around 31,000 FHA borrowers took advantage of the Streamline refinance option. In the first quarter of 2016, that number has more than doubled, with over 63,000 borrowers refinancing.
The FHA Streamline refinance program is only available to homeowners who already have an FHA mortgage. As with a traditional refinance, the homeowner takes out a new loan to replace their current FHA loan. However, the Streamline refinance differs from traditional refinancing because the homeowner is not required to provide proof of their income. Instead, if the borrower is current on their mortgage payments, the lender assumes they have sufficient income. The program also does not require an appraisal.
In most cases, the borrower will refinance a fixed-rate mortgage to another fixed-rate mortgage, but there are some FHA loans that are adjustable-rate mortgages (ARM). These rates often start out around 2 percent, but can increase based on changes in the market rates. Homeowners may take out an ARM if they plan on selling the property within a few years, but some may later decide to continue living there. Doing an FHA Streamline refinance can allow them to replace their original mortgage with a fixed-rate loan.