The Federal Housing Administration (FHA) insures loans offered by approved lenders or banks to borrowers who have inadequate funds to make large down payments. Streamline refinance programs are the easiest way to refinance loans for those homeowners who have already been granted an FHA loan for lower monthly interest rates.

Streamline refinance programs have certain advantages:

• Borrowers are not required to calculate the debt-to-income ratio for the new FHA streamline refinance loan.

However, there are also disadvantages in the streamline refinance program, which are as follows:

• The FHA prohibits lenders from incorporating closing costs in the new mortgage amount of the refinanced loan.
• Similarly, since appraisals are not needed for refinancing loans, even if the value of the mortgaged property increases, it means a higher loan amount is not permitted.

The criteria for eligibility of FHA streamline refinance are as follows:

• Borrowers must own the mortgaged property for at least 6 months before qualifying for this refinance program.
• Refinancing must not have been done for at least 210 days before seeking a streamline refinance.
• Mortgage payments for the last 12 months must have been made on time, and for the full amount every time.
• Credit scores of borrowers must be at least 620 or higher.
• The FHA demands that borrowers actually benefit from refinancing their loan. The net benefit rule insists that there is a 5% reduction to the principal and interest of the mortgage payment plus the annual mortgage insurance premium, or refinancing is done from an adjustable rate mortgage to a fixed rate.