Many are asking or not sure what a FHA Streamline Refinance can do for them. Let us break it down. Many FHA Streamline loans are helping homeowners across the country refinance lower monthly mortgage payments at superior interest rates. In many states across the county borrowers are improving their mortgage rates.
The number one question, what do you need to qualify for an FHA Streamline loan? Well, you need an existing FHA mortgage to start. If not you must apply to refinance your conventional loan through a FHA refinancing loan program.
Those borrowers with conventional loans looking to refinance through a FHA loan program will need to apply for the usual credit check, employment verification, and debt-to-income ratio requirements. By refinancing a conventional loan to an FHA-insured refinancing loan you may get better rates and lower monthly payments.
For example borrowers already in the FHA home loan program, the requirements for Streamline include:
1. Up-to-date on current existing loans with all mortgage payments on schedule for the last year.
2. You must own the original property for at least six months prior to qualifying for Streamline refinancing.
3. To refinance borrowers must go through an FHA-approved lender. If you don’t want to use your current lender, any financier you choose must be approved by FHA.
4. FHA Streamline loans don’t require appraisal, however no-appraisal loan cannot exceed your current loan.
5. All closing costs must be paid up front or coordinated through a “no-cost” FHA Streamline loan. Borrowers can also include the closing costs with their loan for “with appraisal” FHA Streamline loans. Although, you must have enough equity in the home to cover the extra amount.
Another option is called the “FHA Streamline 203(k) Loan. This loan is designed for those that may want to refinance modify plans or improve the home. The 203(k) is compares with the general Streamline loans with a few exceptions.
1. FHA Streamline 203(k) Loans are a minimum $5,000. The maximum loan being $35,000. It is can be added to your mortgage for weatherizing your home, removing lead paint and other home improvements that don’t include major home alterations.
2. Under the Streamline 203(k) Loan guidelines, you are required to use at least one contractor to do the repair work. Self-help renovations are prohibited unless the borrower can prove he/she is an expert.
3. FHA guidelines state you must get an estimate that is broken down into by the contractor into specifics including the costs of each project. The contractors must sign an agreement to do all the work outlined in the estimate for pre-determined amount and within the time line.
4. Borrowers must obtain all permits required by law.
Some restrictions on 203(k) Streamline refinancing loans include no major structural repairs such as altering a load-bearing wall or work that needs architectural plans. Home improvement work that exceeds $15,000 requires third-party inspection after the job is done and certifications submitted to FHA.
Under FHA guidelines borrowers are permitted to make two payments to each contractor. If you do the work yourself as a “expert”, same rules apply.
While borrowing under FHA Streamline 203(k) programs, you must “close out” the loan when by furnishing a “mortgagor’s acknowledgement of satisfactory completion, mortgagee’s inspection report(s), change orders, mortgagee accounting of the escrow funds, and record of disbursements.”
With all of the FHA programs above, it’s very important to keep accurate records in order to prove the work was completed according to agreement within the scheduled timeframes.