The FHA streamline loan is among the easiest loans to qualify for, assuming you have an FHA loan now. The FHA made it simple for current FHA borrowers to refinance their loan with little documentation. They wanted FHA borrowers to have a simple way to reduce their monthly payment and/or interest rate without having to go through the entire approval process again.
The documents you need for FHA streamline approval are minimal compared to what you needed when you bought the home.
Proof of a Timely Mortgage Payment History
First, you must prove that you pay your current mortgage on time. If you don’t, you won’t be able to use the FHA streamline program. This is the main factor lenders use to approve you for the loan. They figure if you could make your current FHA payments on time and your new loan should have lower payments, there’s little risk of default.
Just what do timely mortgage payments mean? The FHA wants to see no late payments made in the last 12 months on your mortgage. They do allow lenders to grant an exception if you have one 30-day late payment in the last 12 months. But, it can’t be within the last three months. In other words, you should be current on your mortgage when you apply for the streamline loan.
You can prove your timely mortgage payment history with any of the following documents:
- Current mortgage statement that shows your mortgage lender’s name and phone number
- A credit report that shows the last 12 months of mortgage payments
Proof of a Net Tangible Benefit
Next, lenders need to make sure there is a net tangible benefit for the refinance. The FHA doesn’t want you refinancing if it doesn’t save you money or give you any other benefits. How you prove this depends on the benefit you receive.
- If you will secure a lower mortgage payment, you can provide your current mortgage payment or the credit report to show your current payment.
- If you will refinance into a shorter term, you can show your loan’s note to prove the current term that you have now and how it will decrease with the refinance.
- If you will refinance out of an ARM into a fixed rate loan, you can provide the loan’s note to show that you currently have an ARM.
The above documents are all the FHA requires. The lender may have other thoughts, though. Sometimes lenders add their own requirements to make sure you do qualify for the loan. It makes sense, since lenders are the one putting their neck on the line. They want to make sure beyond a reasonable doubt that you can afford the loan.
A few common documents required based on lender overlays include:
- Paystubs to prove your current income
- Asset statements to prove your cash reserves
- Credit report to prove your credit score
- Employer phone number and contact name to verify your employment
If you find an easy lender that only requires what the FHA requires, you can get away with little documentation on an FHA streamline loan. If you come across a lender with a few more overlays, it may take you a little more work and a few more documents, but you may end up with the approval that you need as long as your factors line up with what you stated on your application.