A streamline loan refers to refinancing your current home mortgage to obtain a lower rate and payment. For lenders offering streamline, the process should result in less paperwork and easier qualification than for the original mortgage. The possibility of a streamline refinance could help homeowners who have seen the value of their homes fall below the current loan balance.
Mortgages financed using the government programs of the FHA and VA are eligible for formalized streamline processes. These agencies have guidelines on who can get a streamline refinance and the limitations for refinancing. Mortgage lenders follow the FHA or VA guidelines to replace a current FHA or VA loan with another from the same source with better terms. Other lenders may offer streamline refinancing with some or all of the terms offered by the two government-backed programs.
FHA Streamline Refinance
The FHA streamline program is the best known and has been in existence since the 1980s. The FHA streamline program allows an FHA-to-FHA refinance to lower the interest rate and payment from the current loan without proof of income or a home appraisal. The homeowner must be current on payments for the existing FHA loan and show proof of employment. No cash can be taken through an FHA streamline refinance, and if the no-appraisal option is used, the loan balance cannot be increased by rolling closing costs into the new mortgage.
VA Streamline Refinance
The VA-to-VA streamline program is officially called an interest rate reduction refinancing loan -- IRRRL. The IRRL is a very liberal refinance program, allowing a refinance to a lower rate without an appraisal or credit report. The VA streamline refinance also allows the homeowner to roll closing costs into the new loan balance and can also include the next two monthly payments in the new loan. The VA Benefits website notes that lenders do not have have to follow the VA requirements concerning appraisal and credit and a homeowner should shop several lenders.
Conventional Mortgage Streamline
Mortgages that are owned by the government-sponsored agencies of Freddie Mac and Fannie Mae may be eligible for a streamline refinance offered by those companies. The agencies have a range of streamline refinance options. They generally require a credit check and appraisal but do not require income verification. The refinance loans can be used to lower an interest rate, switch from an adjustable rate to a fixed rate or shorten the mortgage term. Fannie and Freddie allow limited cash-out with the streamline programs.