If there’s one thing that anyone can say about the FHA streamline application, is that it’s fast and simple! The streamline program is only for borrowers that currently have an FHA loan and that simply want to refinance to lower their rate or change their loan in a beneficial way. You can’t take money out of your home’s equity and you don’t have to verify very much information, so the application process is simplified.
Completing the Application
Like any mortgage, you must complete the standard loan application. On this form, you will have to disclose your personal identifying information as well as your income and assets. The difference is that you won’t have to verify it.
The lender will process your application as they do any other loan, but they won’t ask for verification of many of the items on the application. They will obviously verify that you are who you say that you are and they will look to make sure that you are employed and have income, but that’s it. You won’t have to provide your tax returns, pay stubs, or W-2s.
Decide Whether you Want an Appraisal
There is a tricky question you must consider with the FHA streamline loan. Technically, you don’t need an appraisal. The FHA allows lenders to use the original appraised value of the home. But, if you won’t have the money to cover the closing costs upfront, you may need to pay for that appraisal. This way if your home appreciated, you’ll be able to wrap the closing costs into your loan. Without the appraisal, you won’t be able to do this.
Make Your Mortgage Payments on Time
Because of the lack of required verification, you have to have on-time mortgage payments. This is only one of two requirements for the FHA streamline loan. Technically, you should have 12 on-time monthly payments over the last year. In some cases, lenders can let one 30-day late mortgage payment slide as long as you are current on the loan at the time of application.
Get Your Bank Statements Ready
If you will pay the closing costs at the closing, you will have to verify your assets. The lender needs to know that you have the money to cover them. Typically, you’ll need two months of bank statements to show the lender. This lets the lender determine if the money you will use is your money or if it’s a loan of some sort. If it is a loan, the lender would likely have to evaluate your income and other debts to determine if you could afford the new mortgage.
Make Sure you Benefit
The final requirement for the FHA streamline loan is that you benefit from the refinance in some way. The benefit is usually a lower payment. If you save money each month, it’s easy for the lender to approve you for the loan, especially if you have a history of making the higher payments on time.
You don’t have to save money to benefit from the refinance, though. Some borrowers benefit from refinancing out of an ARM into a fixed rate loan or reducing the term of their loan. As long as you can prove that you benefit in some way, you will satisfy this requirement.
Preparing for the FHA streamline loan is much easier than preparing for your original FHA loan. The application process and the underwriting are much easier when you need the FHA streamline refinance. As long as you make sure that you have a timely mortgage payment history and that you benefit from the mortgage in some way, you should be able to find a lender willing to give you the loan.