Refinancing is made easier and with more benefits under the FHA Streamline Refinance program. It helps borrowers with existing FHA mortgages to lower their payments by reducing the interest and insurance paid on the loan. However, if your home loan is not under the FHA, you may have to consider refinancing through conventional lenders or by applying for an FHA refi loan. You get the same benefits, but would have to go through the standard income verification, credit check, and DTI evaluation processes, among others.
To qualify for Streamline Refinance in 2017, the borrower:
- Must carry a loan under the FHA
- Have non-delinquent, on-time mortgage payments for the last 12 months
- Must own the property for six months before it can be refinanced
- Must choose an FHA-approved lender
- May choose not to undergo appraisal, but if he or she chooses not to go through appraisal, the loan amount should not go beyond the amount of his or her current loan
- Choose whether to pay the closing cost; arrange a No-Cost FHA Streamline Loan; or wrap it on the loan through a “With Appraisal” FHA Streamline Loan. In the previous two cases, the borrower is required to possess enough equity to cover the extra amount associated with closing.
If you plan to refinance for the sole purpose of renovating or improving your home, you can apply for FHA’s Streamline 203(k) Loan. This is basically the same as the ordinary Streamline Refinance program, except for these exceptions:
- Loanable amount is between $5,000 to $35,000. The loan can only be used for the purposes that do not involve major renovations of the home.
- You can do the renovations on your own, given that you will be able to show that you have the skills and expertise to do the job. You are permitted to hire at least one contractor.
- You must get a breakdown estimate of the repairs to be made if you plan to hire (a) contractor/s. This estimate must state the specifics concerning the cost of the project. The hired contractors must sign an agreement to accomplish the necessary work within the estimate’s specified period.
- You must secure permits legally required.
a) No structural renovations are allowed
b) If the cost of improvement exceeds $15,000, the FHA requires an inspection to be done by a third party after the job is completed
c) It is allowed to make two payments per contractor. The same applies if you are the qualified builder.
The loan should be closed after the work is done. For a close-out to be properly completed, the borrower should have supplied a) the mortgagor’s acknowledgement of satisfactory completion, b) evidence of the release of liens, c) the mortgagee’s inspection report, d) changed orders, e) the mortgagee accounting of the escrow funds, and f) the record of disbursements.