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FHA Streamline Refinance Requirements

Overview

The FHA streamline refinance loan is a specialized refinance program designed to make refinancing assimple as possible for FHA borrowers.  This means it’s easier for you to get a lower monthly payment, lower your interest rate, or shorten your loan term.

If you want to refinance an FHA loan the usual way, you’ll have to wade through a seemingly endless sea of paperwork before closing your new loan.  Credit checks, debt to income ratios, employment verification, and other common requirements eat up time and create stress and confusion.  The FHA streamline refinance eliminates many of the complex steps involved, allowing you to get your new loan and your lower interest rates without delay.

But there are a few requirements you’ll have to meet to qualify for one of these streamlined loans.  The following outline covers these requirements.

Requirements for FHA Streamline Refinance

First, and most importantly, you must have an existing FHA loan.  There are other programs out there for those who do not have FHA mortgages, including the standard FHA refinance and conventional refinancing, but if you want to take advantage of the FHA streamline refinance option, you must have a current FHA mortgage on your primary residence.

Other requirements include the following.

• You must have a good history with the lender, meaning that you have made payments on time for at least one year. You must not be currently behind on your payments.
• Assuming that you want to change lenders, any lender that you choose must be FHA approved.
• You must have owned the property for at least 6 months prior to refinancing.
• Closing costs must be paid for up front unless you plan to include them in the balance of the loan.  This is an out of pocket expense that you need to be prepared for.  If you do decide to include the closing costs in the loan, you’ll need to have enough equity in the home to cover this cost.
• Although these types of loans do not require an appraisal, you will be limited to the original amount of the loan unless you choose to pay for a new appraisal to show that the home value has increased.

Requirements for FHA Streamline 203(k) Refinance

There are a lot of reasons why you might want to refinance your home.  One reason many borrowers refinance is to gain funds to put toward improvements to the property.  There is a specific FHA streamlined option to cover this need as well. The FHA streamline 203(k) refinance loan is a lot like the typical streamlined loan, but a few of the requirements are different.

• You cannot do the work yourself.  It is required that you have one or more contractors who are licensed to do the work at hand.  The only exception is that if the homeowner can show his or her ability to do the work, such as licensure in the area needing improvements, this requirement is waived.
• A minimum loan amount of $5,000 is required.  The maximum amount allowed is $35,000.  This amount is simply added to your mortgage balance.
• The contractor you choose to do the repairs must meet specific requirements. The estimate that you get from the contractor must be itemized to include specific costs for each job being completed.
• City permits must be obtained prior to any work being completed as required by the laws of the city and state.

Further restrictions to the FHA streamlined 203(k) loan state that you may not use the loan to do any kind of structural repairs that require an architectural plan.  If there is more than $15,000 in work done to the property, you must obtain a third party inspection after the work is completed.  This same rule applies if you have been allowed to do the work yourself.

Once the home improvements have been finished, you must close out the process.  This simply means that you must provide notice to the FHA that the work has been completed.  You should keep extensive records stating when the work was completed, when the final inspection was completed, how much money was paid to each and every contractor, and whether the work was completed according to the agreements set forth in the loan.  You will need this information to close out the 203(k).

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