FHA Qualifications for a Streamline Refinance – the Dos and Don’ts.

streamline refinanceFederally insured loans are a good way for people to take control of their housing situation when they can’t qualify for funding through a conventional lender. This is true for new homeowners, but it’s also true for existing homeowners who have a mortgage that is just a little bit more than they can handle. The streamline refinance was designed specifically for these homeowners, the ones that need to revamp their mortgage to make it more workable. The FHA qualifications are not difficult to meet and the end result is a mortgage that takes a smaller bite out of your monthly paycheck.

FHA Qualifications for Approval

streamline refinanceAs you might have guessed from the name, the streamline refinance is a faster, easier way to refinance your home. Like all FHA loans, you do have to meet a few minimum requirements. These requirements include a decent credit score, credit history, work history, and assets. Of course, if you are eligible for a streamline refinance than there is a good chance you already meet these qualifications.

That being said, here is a quick overview of what has to happen before qualification for a 203b loan. First, you have to have a credit score of at least 500. Any lower than that and you cannot qualify for a federally insured loan. If the score is between 500 and 579, you can qualify for a loan at 90% loan to value. Anything higher than a score of 580 means you are eligible for the full amount of federal insurance and you can qualify for a loan at 96.5% LTV.

In addition to this, you have to have a stable work history and a two year relationship with the same employer. During this two years your pay has to have remained stable or increased. You also cannot have a previous default on a federal loan in your financial history for at least three years. If you do have this on your history, you will have to wait until you’ve hit the three year mark.

Now, these FHA qualifications are some of the basics for a federally insured loan, but as mentioned, if you’re looking at a streamline refinance, chances are you’ve already met these qualifications. In order to complete the qualifications for the streamline you must already have an existing FHA mortgage; you cannot have a conventional loan and get a federally streamlined refinance. That just won’t happen.

Another requirement for the streamline is that your monthly principal and interest payments must be lowered as a result. The streamline is there to help make mortgage payments more
manageable, it’s not there to make it easy to pull out your equity. So if you won’t end up with lower payments as a result, you won’t be able to qualify. And last, you cannot pull out any money. In some cases the homeowner will receive up to $500.00 but that just depends on what happens when the loan closes. The requirements also state that an appraisal is not necessary, so that makes it easier, and the final terms of the loan will be 30 years or 12 years plus the remaining term of the current loan, whichever is less.

When getting Qualifed for a loan isn’t Possible

Streamline refinanceWhile the FHA qualifications are not difficult to meet for a streamline refinance, there are some situations where you simply won’t be able to qualify for a federally insured loan at all. First, as
mentioned above, a loan qualify will not happen if your credit score is less than 500, so take the time to rebuild it first before you try to get a 203b loan. If your credit score is fine but you’ve been suspended or excluded from HUD program, than you will be rejected for a loan. You have to remain in good standing with HUD if you want to qualify for federally insured funding. And, if you have a federal debt or federal lien on your property that has gone into delinquency, don’t plan on qualifying for a federally insured loan until you have paid the debt. There is one exception to this rule and that is with the IRS. They will often take out second lien positions on an individual’s property. Unless they demand a first lien position, you may still be able to qualify for the loan.

In summary, to qualify for a streamline refinance you must already have an FHA mortgage. If this is the case than make sure you financial history is in good standing and you are current on your mortgage payments. Also, whatever you do, don’t get your finances at odds with the federal government. This won’t end well if you want to qualify for a federally insured loan.

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