The FHA Streamline refinance programs refers to the refinance of an existing FHA-insured mortgage that requires very little borrower credit documentation and underwriting. Streamline refinances are available for both credit qualifying and non-credit qualifying borrowers. “Streamline refinance” only refers to the amount of documentation and underwriting that the lender must perform. It does not mean that there are no costs involved in the transaction. The borrower must be current on their FHA loan payments over the past 12 months and the borrower does not receive any cash in the refinance transaction.
FHA prohibits lenders from including the closing costs in the new mortgage amount of a streamline refinance. However, lenders can offer a streamline “no cost” refinance by charging a higher interest rate on the new loan and using the extra funds to pay the closing costs incurred in the transaction.