FHA Streamline Loan Requirements
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:
- 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.
- 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.
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