FHA Loan Articles
News, updates, and explanations to keep you informed.
FHA Streamline Loan Requirements
FHA Streamline loans can help homeowners lower monthly mortgage payments and interest rates. But what do you need to qualify for an FHA Streamline loan? To begin, you need an existing FHA mortgage-if you don't have an FHA loan but want to refinance, your options include conventional refinancing or applying 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.
For those who do have an FHA home loan, the other requirements for FHA Streamline include:
There is another Streamline product made for those who want a refinancing plan to help them modify or improve the home. This is known as an FHA Streamline 203(k) Loan. The 203(k) is similar to ordinary Streamline loans with a few exceptions.
- Being current on the existing loan with all mortgage payments made on time for the last year.
- You must own the original property for at least six months before you can qualify for refinancing.
- To refinance you'll need an FHA-approved lender. If you don't want to use your current lender, any bank you choose must be FHA approved.
- FHA Streamline loans do not require an appraisal, but a no-appraisal loan cannot exceed your current loan.
- Closing costs must be paid up front or arranged for through a "no-cost" FHA Streamline loan. You may also choose to include the closing costs into your loan a "with appraisal" FHA Streamline loan. In these cases you must have enough equity in the home to cover the extra amount.
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 work that needs architectural plans. If your home improvement work exceeds $15,000 the FHA requires you to have a third-party inspection after the job is done.
- The 203(k) has a minimum of $5,000. The maximum loan amount is $35,000. This amount is added to your mortgage for weatherizing your home, removing lead paint and many other home improvements that don't involve major alterations of the home.
- 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 proper expertise.
- 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 must sign an agreement to do all the work included in the estimate for the amount and within the time specified.
- You must obtain all permits required by law.
You are permitted to make two payments to each contractor. If you do the work yourself as a qualified builder, the same rule applies.
When borrowing under the FHA Streamline 203(k) program you must "close out" the loan when the work is complete. According to FHA.gov, you may be required to furnish "mortgagor's acknowledgement of satisfactory completion.mortgagee's inspection report(s), change orders, mortgagee accounting of the escrow funds, and record of disbursements." It's important to keep records of these items and more to prove the work was completed according to the agreement and in a timely manner.
FHA NEWS and RELATED ARTICLES
One type of question that sometimes arises about FHA loans-- Is there a no-credit-check version of an FHA mortgage loan? What is the criteria required for FHA loans that do not require a credit check and/or appraisal?
One not-so-common question about FHA loans still comes up often enough to discuss in detail. Some FHA loan applicants want to know if they can purchase a residence from another family member using an FHA insured mortgage.
Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios if certain conditions are met.
Some FHA borrowers have questions about applying for an FHA loan after experiencing a short sale on a previous home. The FHA loan rules found in HUD 4155.1 have the answers for borrowers applying for an FHA mortgage after a short sale.
The FHA and HUD issued new rules for mortgage insurance designed to add fiscal security to the loan program, and when those rule changed the new guidelines were published in Mortgagee Letter 2013-04.