FHA Streamline Refinance Closing Costs
When interest rates are low, refinancing to get a lower rate and payment is something many homeowners will strive for. FHA streamline refinances allow you to do that without an appraisal or income documentation.
With most mortgage programs, you can include the closing costs in your new loan without having to bring a check to the closing table. However, FHA guidelines do not permit FHA streamline refinance closing costs to be included in the new loan amount.
FHA Streamline Refinance Closing Costs
FHA streamline refinance closing costs will average anywhere from 2-3% of the loan amount. With the exception of the net FHA mortgage insurance premium, your closing costs must be paid out of pocket.
These are some of the larger standard FHA closing costs that you should be prepared to pay. You will notice there is no appraisal fee because that is not required for an FHA streamline refinance:
- Underwriting Fee – Up to $750
- Processing Fee – Up to $750
- Title Fees and Insurance – $500 – $2000+ (varies by property)
- Tax and Insurance Escrows – $500 – $2000+ (varies by property)
- Loan Origination Fee – 0-2% of the loan amount
- Discount Points – 0-2% of the loan amount
- Upfront FHA Mortgage Insurance Premium – 1.75% of your loan amount (see below)
There are other smaller closing cost items that you will likely see including but limited to fees for credit reports, tax service, flood certification, and recording. The title fees and tax escrows may be a lot lower based upon the property you plan to purchase.
To see a full list of all potential closing costs, read our article on FHA closing costs. If you would like to get a quote and understand exactly how much you will need to pay in closing costs, then fill out this FHA Streamline Refinance Quote Form.
Upfront FHA Mortgage Insurance Premium Costs
When refinancing with an FHA streamline refinance, you will have to pay for the new FHA mortgage insurance premium, but you will also get a refund for some of the original premium that you paid when you purchased the home. It is the difference between the two that would need to be paid. The good news is this difference can be included in the loan and does not need to be paid out of pocket.
Here is an example of how the FHA mortgage insurance premium works with an FHA streamline refinance.
- Remaining Mortgage Balance = $190,000
- Upfront Mortgage Insurance Premium Refund = $1,700
- New Upfront Mortgage Insurance Premium = $3,325
- New Upfront Mortgage Insurance Premium Less the Refund = $1,625
- New Loan Amount = $191,625
To learn more, read about the full article on the FHA Mortgage Insurance Premium.
Tax and Insurance Escrows
When you refinance your home, the lender will require you to setup tax and insurance escrows. This is so they can make those payments for you during the year. They will escrow one quarter (three months) of the year’s tax and insurance payments.
The tax escrows are collected at closing and cannot be included in the loan amount for an FHA streamline refinance.
Tax and Insurance Escrow Refund – The lender that currently holds your mortgage also has an escrow account setup for you. This lender will send you a refund check for the escrow balance after you close on your new loan. You should receive this refund within 30 days after your FHA streamline refinance closes.
Although the tax escrows can be significant, you will only be out of pocket on those costs for about one month.
Lender Paid FHA Streamline Refinance Closing Costs
Your lender may offer you the option of having them pay for all or a portion of your FHA refinance closing costs. This is common practice and it is a great way to refinance without any out of pocket costs.
If you select lender paid closing costs, the lender will need to offset this by charging a higher rate. You can determine whether it makes more sense to pay for the closing costs yourself or go for the slightly higher rate in exchange for no closing costs.
Even with the slightly higher rate, your monthly payments should still be a lot lower than what you are paying now. This is required by HUD as a net tangible benefit.
Related Articles
FHA Streamline Refinance Requirements – This is the full explanation of what is needed to qualify for an FHA streamline refinance.
Is an FHA Streamline Refinance a Good Idea? – This article will help you to decide whether this program is right for you.
