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FHA Streamline Loans: List of Requirements

An FHA streamline loan may seem to be the answer to your prayers if you are a homeowner who is worried about their lasting ability to make payments on their property. These loans are designed, simply put, to lower your monthly payments and to make refinancing as simple as possible. There are a few things that you will need in order to qualify for these types of loans. Most importantly, you must have an existing FHA mortgage. There are other programs out there for those who do not have an FHA mortgage including an FHA refinancing loan or even conventional refinancing.

There is a seemingly endless amount of paperwork involved in obtaining a traditional FHA refinancing loan. Things like credit checks, debt to income ratios, employment verification, and other common requirements. However, it may very well be worth your time to lower your monthly payments and your interest rate which is likely the case when moving from a conventional loan to an FHA loan.

If you do already have an FHA loan, however, there is an option out there for you that is simple, fast and has an incredible impact on your monthly payments. Many modest income residents in states like Nevada, Utah, Colorado, New Mexico and Idaho got their first homes by utilizing and FHA loan. The requirements for the FHA streamline loan are as follows:

1. You must have a good history with the lender meaning that you have made payments on time for at least one year and that you are not currently behind on your payments.
2. Assuming that you want to change lenders, any lender that you choose must be FHA approved.
3. You must have owned the property for at least 6 months prior to refinancing.
4. Unless you plan to include closing costs in the loan, then they must be paid up front. 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 then you will need to have enough equity in the home to cover this cost.
5. 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 do an appraisal to show that the value has increased.

There are a lot of reasons why a person might want to refinance their loan, one if which is to do improvements to the property. There is an FHA streamlined option for this as well. The FHA streamlined 203(k) loan is a lot like the typical streamlined loan, with just a few differences.

1. 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 ability to do the work. (For example, he was licensed in the area of improvements)
2. A minimum loan amount of $5,000 and a maximum amount of $35,000 is required with the 203 (k) loan. This amount is simply added to your mortgage
3. There are specific requirements for the contractor that you choose to do these repairs. The estimate that you get from the contractor must be itemized to include specific costs for each job that he is completing.
4. City permits must be obtained prior to any work being completed as required by the law in the city and or 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 requires an architectural plan. If there is more than $15,000 in work done to the property then it is required that you obtain a 3rd 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 the FHA streamlined 203 (k) loan will ask that you "close-out" of the process which simply means that they will be given notice 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 that was paid to each and every contractor and that the work was completed according to the agreements set forth in the loan.

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