FHA Streamline loans are designed to help homeowners lower their monthly mortgage payments and interest rates. Did you know you can apply for an FHA Streamline refinancing loan to do repairs, modifications or upgrades to your home?
News, updates, and explanations to keep you informed.
FHA Streamline Loan Requirements
FHA Streamline loans are designed to help homeowners lower their monthly mortgage payments and interest rates. The basic requirements for an FHA Streamline loan include:
An existing FHA mortgage-if you don't have an FHA home loan, you will need to seek conventional refinancing or apply for an FHA refinancing loan. If you have a conventional loan you wish to refinance with an FHA refinancing loan, you'll need to apply with the usual credit check, employment verification, debt-to-income ratio requirements and other considerations. An FHA Refinancing loan can get you many of the same results-if you refinance from a conventional loan to an FHA-insured refinancing loan you may get better rates and lower payments.
A current loan. You must have all mortgage payments made on time for the last year.
You must own the original property for at least six months before the refinancing.
An FHA-approved lender. If you currently have an FHA loan but wish to find a new lender, any bank you choose must be FHA approved.
FHA Streamline refinancing is not "cash-out". You don't get any money from the refinancing deal.
FHA Streamline loans do not require an appraisal, but if you choose a no-appraisal loan the amount can't exceed your current loan.
Closing costs must be paid or arranged for through a "no-cost" FHA Streamline loan or by including the closing costs into a "with appraisal" FHA Streamline loan.
FHA STREAMLINE 203(K) LOANS
Did you know you can apply for an FHA Streamline refinancing loan to do repairs, modifications or upgrades to your home? An FHA Streamline 203(k) loan is much like the original Streamline loan program, except the 203(k) has a minimum of $5,000 and a maximum loan amount of $35,000. This amount is added to your mortgage for weatherizing your home, removing lead paint, replacing gutters and downspouts, and many other home improvements.
You are required to use at least one contractor to do the repair work. Self-help renovations are not allowed unless the borrower can prove they have expertise in the work to be done. This could include licensing and/or certification in custom building, home repair or related areas.
When choosing a contractor, FHA guidelines state you must get an estimate which is broken down into specifics regarding the costs of each project. Contractors are required to sign an agreement with you to complete the work included in the estimate for the amount and timeframe specified. An important part of the FHA-insured Streamline 203(k)-you must get all permits required by law to start and complete the work.
There are restrictions on 203(k) Streamline refinancing loans. You cannot use the 203(k) loan to do major structural repairs such as altering a load-bearing wall or any work requiring architectural plans. If your home improvement work exceeds $15,000 the FHA requires you to have an inspection once the work is finished. The inspection must be done by a third party.
When using a contractor, you can make two payments to each contractor. No more. The same rule applies if you are performing the work yourself as a qualified builder or other specialist.
When borrowing under the FHA Streamline 203(k) program you must "close out" the loan when the work is complete. According to FHA.gov, that includes "mortgagor's acknowledgement of satisfactory completion.mortgagee's inspection report(s), change orders, mortgagee accounting of the escrow funds, and record of disbursements." Be sure to keep careful records of these as you may be asked to furnish proof of the work done in a satisfactory manner.