Rules do applyWhile the streamline refinance doesn't have the typical strict set of refinance requirements, it does have several specific standards that borrowers much meet.
- The refinance must reduce payments: In order to be approved, the refinance terms must reduce your monthly payment by at least 5 percent.
- You must be current: Refinance applicants must be current on their mortgage. Borrowers are only allowed one late payment in the previous year. Furthermore, you must have made your last three mortgage payments in full and on time.
- There's a refinance waiting period: You must make payments for at least six months on your existing FHA mortgage before you can apply for a streamline refinance.
- Your loan balance cannot increase: The FHA doesn't allow you to take any cash out with a streamline refinance. All of the closing costs and fees associated with your loan must be paid out of pocket -- they cannot be financed into the loan amount. "In most cases, the borrower will have to bring some cash to the table to close," says Parsons. If you don't have cash available to pay for the closing costs, your lender can offer you a higher-than-market interest rate in exchange for paying the closing costs.