What is the difference between a FHA Simple Refinance loan and a FHA Streamline Refinance Loan.? If you already have an FHA loan and are looking to refinance, you’ve likely come across two common options: the FHA Simple Refinance and the FHA Streamline Refinance. While both are designed specifically for homeowners with existing FHA mortgages, they work very differently.
Understanding the difference between these two FHA refinance options can help you choose the one that saves you the most time, money, and stress. In this guide, we’ll explain how each loan works, its requirements, and how to decide which one is right for you.
What Is an FHA Simple Refinance Loan?
An FHA Simple Refinance Loan allows you to replace your current FHA mortgage with a new FHA loan. Homeowners usually choose this option to lower their interest rate, reduce their monthly payment, or switch from an adjustable-rate mortgage to a fixed-rate loan.
This type of refinance follows a process similar to a traditional mortgage refinance, meaning the lender fully reviews your financial profile.
FHA Simple Refinance Requirements
- You must currently have an FHA-insured mortgage
- Full income and employment verification is required
- A credit check is required
- A home appraisal is required
- The refinance must provide a net tangible benefit
Because of these requirements, the FHA Simple Refinance can take longer to complete, but it offers more flexibility for borrowers who qualify.
When an FHA Simple Refinance Makes Sense
- Your credit score has improved
- You have a stable income and employment
- Your home has enough equity to pass an appraisal
- You don’t qualify for an FHA Streamline Refinance
- You want a more traditional refinance structure
What Is an FHA Streamline Refinance Loan?
An FHA Streamline Refinance Loan is designed to be fast, easy, and low on paperwork. It allows FHA homeowners to refinance their existing loans with minimal documentation, making it one of the most popular FHA refinance options.
The main goal of the Streamline Refinance is to help borrowers lower their interest rate or monthly payment with fewer obstacles.
FHA Streamline Refinance Requirements
- You must currently have an FHA loan
- You must be current on your mortgage payments
- The refinance must show a net tangible benefit
- No appraisal is usually required
- Income and employment verification are often not required
- Credit review is limited and varies by lender
Because the FHA already insures your existing loan, it allows lenders to skip many steps found in a traditional refinance.
When an FHA Streamline Refinance Makes Sense
- You want to lower your interest rate quickly
- Your home value has declined or stayed the same
- Your income has changed, but you’ve paid your mortgage on time
- You want less paperwork and a faster closing
FHA Simple Refinance vs. FHA Streamline Refinance: Key Differences
While both loans refinance an existing FHA mortgage, there are several important differences to consider.
Documentation and Paperwork
- FHA Simple Refinance: Full documentation required
- FHA Streamline Refinance: Minimal documentation
If you’re looking for the easiest process, the Streamline Refinance is usually the better option.
Appraisal Requirements
- Simple Refinance: Appraisal required
- Streamline Refinance: Appraisal usually not required
This makes the Streamline Refinance especially helpful for homeowners who are worried about low home values.
Credit and Income Review
- Simple Refinance: Full credit and income review
- Streamline Refinance: Limited review
Borrowers with weaker credit or less predictable income often find the Streamline Refinance easier to qualify for.
Closing Costs
Both FHA refinance options include closing costs, which can be:
- Paid out of pocket, or
- Rolled into the loan balance (within FHA limits)
Because Streamline Refinances involve less work, they often have lower overall closing costs than Simple Refinances.
Speed of the Refinance Process
- FHA Simple Refinance: Slower, similar to a traditional refinance
- FHA Streamline Refinance: Faster and more streamlined
Many Streamline Refinances close in just a few weeks.
Net Tangible Benefit: A Requirement for Both Loans
The FHA requires that all refinances provide a net tangible benefit to the borrower. This means the refinance must clearly improve your financial situation.
Examples of a net tangible benefit include:
- A lower monthly mortgage payment
- A lower interest rate
- Moving from an adjustable-rate mortgage to a fixed-rate mortgage
- Shortening the loan term (in some cases)
This rule helps protect borrowers from refinancing when it doesn’t truly help them.
Which FHA Refinance Option Is Right for You?
Here’s a simple way to decide:
Choose an FHA Streamline Refinance if:
- You want the fastest and easiest refinance
- You’re mainly lowering your interest rate
- You prefer minimal paperwork
- You want to avoid an appraisal
Choose an FHA Simple Refinance if:
- You’re comfortable with a full underwriting process
- Your financial profile is strong
- You want more flexibility in loan terms
- You don’t qualify for a Streamline Refinance
Final Thoughts
Both the FHA Simple Refinance Loan and the FHA Streamline Refinance Loan can be excellent tools for homeowners with existing FHA mortgages. The best choice depends on your financial situation, your goals, and how much documentation you’re willing to provide.
If your priority is speed and simplicity, the FHA Streamline Refinance is often the best option. If you want more flexibility and don’t mind a full review, the FHA Simple Refinance may be a better fit.
Speaking with a knowledgeable mortgage professional can help you compare both options and determine which FHA refinance loan makes the most sense for your situation.
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Ps: Please check out other posts on refinancing loans.