Last Updated: February 15, 2025
Utah FHA Streamline Refinance: Simplify and Save on Your Mortgage
No income, no appraisal? No problem! Did you know you can streamline your FHA loan to a lower interest rate without the hassle of a normal refinance?
The process of streamlining your existing FHA mortgage loan involves replacing it with a brand new FHA loan at a lower interest rate, or other qualifying benefit. The old mortgage gets paid in full, and a new one takes its place.
The basic requirements of a Utah FHA streamline mortgage are:
- the current mortgage loan being streamlined must be an FHA insured loan (regardless if it’s still occupied as a primary residence, or has been used as an investment property)
- the refinance has to have a net tangible benefit, which will be detailed below
- cash back in excess of $500 is not permitted on this type of mortgage transaction.
- 580 minimum credit score, on a mortgage history report only
- no late mortgage payments in the most recent 6 months, and only one 30 day late payment allowed in the past year
- at least 210 days must have passed from the closing date of the mortgage being refinanced, and the borrower must have made at least 6 scheduled payments
What is the Net Tangible Benefit on an FHA Streamline?
All Utah FHA streamline refinance transactions must provide a tangible net benefit to the borrower(s). This benefit has to outweigh any costs associated with the loan, and there is some underwriter/lender discretion in terms of what is considered a benefit.
HUD defines a net tangible benefit as any of the following:
- a reduced combined interest rate (interest rate + the Mortgage Insurance Premium rate)
- a change form an adjustable mortgage rate (ARM) to a fixed rate mortgage
- a reduced loan term for repayment
For most loans, the minimum required combined rate must be reduced by at least 0.5%.
In the case of FHA streamline refinances that reduce the loan term by at least 3 years, the new combined rate just has to be smaller or equal to the old combined interest rate. The new mortgage payment also can’t be higher than the old payment by more than $50.
What are the Pros and Cons of doing a Utah FHA streamline?
The main goal of a Utah FHA streamline is to make it easier for FHA borrowers to take advantage of lower mortgage rates. Sometimes the choice is clear cut. Other times, a full refinance makes more sense.
Benefits of the FHA streamline refinance
- available on Utah FHA properties that are both owner occupied, or currently used as investment properties
- because no appraisal is required, you can refinance even if you have no equity, or if you’re upside down on your home value
- no income documentation is required on non-credit qualifying FHA streamline refinances – your other debts won’t affect your ability to lower your mortgage payment when market conditions allow it
- within 3 years of your loan closing, you might get a small mortgage insurance premium (MIP) refund. Your lender will automatically apply it towards your closing costs
- fast closings, due to limited documentation requirements.
Drawbacks of doing an FHA streamline refinance
- the mortgage being streamlined has to be an FHA loan
- you cannot be delinquent on your mortgage payments
- you will need to “credit qualify” (referring to income) if your new mortgage payment will increase by 20% or more, or if you’re removing a borrower from the FHA mortgage loan
- if the property being streamlined is currently used as an investment property, lenders may require a higher credit score, and other lender dependent restrictions could apply (some lenders simply won’t streamline investment properties)
- second/vacation homes are ineligible
- closing costs cannot be rolled into the loan amount with an FHA Streamline refinance, so it’s even more important than ever to shop around
- no cash back is allowed, besides an incidental $500 or less
If you’re not sure if a streamline refinance is right for you, you can always email me the details of your situation at [email protected], and I can run numbers and advise you on the best course of action.
Costs and Fees Associated with a Utah FHA Streamline Refinance
In terms of FHA mortgage insurance, you’ll once again pay for an up front mortgage insurance premium of 1.75% that can be rolled into your new loan amount. The annual mortgage insurance premium will be based off your initial home value, and your new loan balance, and will be paid monthly just like before.
Unlike the Utah VA streamline refinance, FHA will not allow closing costs, discount points and prepaids to be included in your new FHA streamline loan amount.
- On properties that are currently owner-occupied, a maximum of 30 days of interest and one month’s insurance premium is allowed to be rolled into the new loan amount.
- In the case of a mortgage impacted by forbearance, late fees and suspended mortgage payments can also be rolled in.
This being said, your Utah FHA streamline refinance will still have some of the usual closing costs, such as title insurance, a small credit report fee, a new deed recording charge, and a new escrow account setup. What you won’t likely see are lender origination charges or discount points. And that’s a good thing!
Most lenders that will present you with an FHA streamline refinance offer will give you an interest rate with enough lender credit to cover your closing costs. Some might call it “a no cost refinance”. It’s a higher rate than you would get if you were to pay discount points (or a buy-down), but it shouldn’t cost you anything out of pocket, or if it does, it should be very little. Given you have to meet the FHA streamline net tangible benefit, this guideline insures you’re in a better financial position, and that your home equity doesn’t suffer.
The interest rates offered will vary among lenders, so make sure you shop around. Mortgage companies are not in the business of loosing money, so their profit is already built in. Some have higher profits than other, and you can usually tell by how much their sales people pester (vs educate) you!
Can I add or remove borrowers on a Utah FHA streamline refinance?
- Borrowers may be added, as long as the existing borrowers remain on the Note and the Deed.
- Borrowers can be removed in the event of death or legal separation. The borrower that is awarded the property has to document that they have made the current mortgage payments for a minimum of 6 months.
- Borrowers may also be removed if the streamline refinance is a “credit qualifying” one, where income and debts are considered.
Documentation needed on the Utah FHA Streamline refinance
Here is a list of documents you should gather when doing a Utah FHA streamline refinance:
- a copy of your most recent mortgage statement
- a copy of an unexpired government issued ID
- a current utility bill to prove occupancy if the home is a primary residence
- bank statement showing enough funds to close if applicable
- a copy of your homeowner’s insurance declaration page showing the annual premium
- a copy of your divorce decree or legal separation agreement if applicable
- a payoff statement from the current servicer of your mortgage loan
It’s worth mentioning that your loan servicer might start soliciting you once you ask for a payoff statement. Some are quite aggressive about this, and they might promise incentives, but they will rarely offer you the best terms (combination of interest rate and closing costs). A local Utah mortgage broker like myself can usually find you a much better deal via a lender that’s eager to gain your business.
How do I get started on my Utah FHA Streamline Refinance?
You can fill out an online mortgage application whenever you’re ready, and I’ll be in touch within 24h. As a mortgage broker, I’ll shop around for the best FHA streamline refinance lender, and we’ll aim to close within 3 weeks.
Not sure if an FHA streamline refinance would benefit you? Contact me for a hassle free, detailed Utah FHA Streamline refinance quote.
- For those of you stuck in an FHA Loan with a Second Mortgage, such as those offered through Utah Housing – read my blog post on How To Refinance Your Utah Housing FHA Loan.
If you have further questions not covered here, you can always e-mail me at [email protected].