The Basics
FHA Streamline mortgage loans are advantageous because they lower current monthly payments. The process of obtaining one is similar to applying for any mortgage refinancing, except there's less hassle, less paperwork and low costs. With an FHA Streamline loan:
No credit check is required.
No income documentation with W-2's or paystubs is needed, although proof of employment is.
There is no need to document funds with bank or investment brokerage account statements.
The FHA Streamline loan must also lower your monthly payments.
These features alone reduce the paperwork. In some cases, no appraisal is required.
Qualifiers
There are a few requirements, however. The home must be owner-occupied and you must have owned it for at least six months. The existing loan should be in good standing with no more than one late payment (30 days).
The loan costs must be paid upfront. If you wish to include them in the loan, you must apply for a "No-cost" FHA Streamline loan, which would result in a higher interest rate. You may also obtain a "With-appraisal" Streamline loan, which, obviously, requires an appraisal. There must be enough equity in the home to pay for the closing costs, and no cash can come back to the borrower.
In any event, a "no-appraisal" Streamline loan cannot exceed the current loan.
What If You Want to Improve Your Home?
An FHA Streamline (203k) loan is available for those who wish to modify or improve their homes. The requirements are similar to those of a regular Streamline loan, along with significant additional rules.
The minimum amount of the loan must be $5,000, with a maximum of $35,000. It may not be used for major structural repairs. If it exceeds $15,000, third-party inspections may be required. The work must be done, in most cases, by a licensed contractor who has provided estimates and sticks by them. All building permits are required, and a certification of completion will be needed, along with records of inspections, change orders, escrow funds and the like.
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