Mortgage insurance premium, or MIP, is a requirement for any FHA loan, including the FHA Streamline. This money the FHA collects on the premiums helps them build up their reserves in order to guarantee the loans that they approve. The FHA does not fund their loans; instead, they guarantee them with the banks that fund them. This means that the bank provides the funds, but the FHA offers an insurance policy for the lender should you default on your loan. The MIP is what funds that guarantee. Borrowers pay MIP for the entirety of an FHA loan, but it has different terms for the FHA Streamline loan.

The Loan Origination Date

The first factor that plays a role in your MIP for an FHA Streamline refinance is the origination date of your original FHA loan. If you obtained your loan before June 1, 2009, you have different MIP rates than someone that obtained their loan after that date. Because the rates were higher before June 1, 2009, borrowers are able to obtain lower MIP rates, both upfront and on an annual basis. The rates are as follows:

• Upfront mortgage insurance premium is .01 percent of the loan amount
• Annual mortgage insurance premium is .55 percent of the loan amount

These rates apply to any size, term, and loan-to-value ratio for loans originated before June 1, 2009.

If your loan originated after June 1, 2009, you will pay the current FHA MIP insurance rates, which are slightly higher. The rates are as follows and pertain to loans with a 30-year term, LTV greater than 95%, and loan amount less than $625,000:

• Upfront mortgage insurance premium is 1.75% of the loan amount
• Annual mortgage insurance premium is .85 percent of the loan amount

These rates apply to 30-year term loans which the borrower put down 5 percent or less on the home and the loan amount is less than $625,000. If your LTV is less than 95%; the term is 30 years; and your loan amount is less than $625,000, the MIP rates for the FHA Streamline loan will be different and are as follows:

• Upfront mortgage insurance premium 1.75 percent of the loan amount
• Annual mortgage insurance premium is .80 percent of the loan amount

If you have a loan amount greater than $625,000; a 30-year term; and an LTV greater than 95%, your rates are as follows:

• Upfront mortgage insurance premium is 1.75 percent of the loan amount
• Annual mortgage insurance premium is 1.05 percent of the loan amount

If you have a loan amount greater than $625,000; a 300year term; and an LTV less than 95 percent, your rates are as follows:

• Upfront mortgage insurance premium is 1.75 percent of the loan amount
• Annual mortgage insurance premium is 1.0 percent of the loan amount

If you have a loan with a 15-year term, a loan amount higher than $625,000 and a LTV higher than 90%, your rates are as follows:

• Upfront mortgage insurance premium is 1.75 percent of the loan amount
• Annual mortgage insurance premium is 0.95 percent of the loan amount

If you have a 15-year term, a loan amount higher than $625,000 and a LTV between 78% and 90%, your rates are as follows:

• Upfront mortgage insurance premium is 1.75 percent of the loan amount
• Annual mortgage insurance premium is .70 percent of the loan amount

If you have a 15-year term, a loan amount higher than $625,000 and an LTV lower than 78%, your rates are as follows:

• Upfront mortgage insurance premium is 1.75 percent of the loan amount
• Annual mortgage insurance premiums is .45 percent of the loan amount

Upfront Mortgage Insurance Refund

There is one more exception to the rule pertaining to MIP for FHA Streamline loans. The FHA offers a refund to borrowers that are refinancing their original FHA loan into an FHA Streamline within the first 3 years of owning the mortgage. The refund offered is a proration based on how long you owned the mortgage. As a stipulation for every homeowner, you are not eligible to refinance your original FHA loan until you hold the mortgage for at least 6 months or 210 days. After that point in time, you can refinance into a lower rate as well as receive an MIP refund. The largest refund you are eligible to receive is 70% if you refinance on the 6th month of owning the first FHA mortgage. From that point, the refunds decrease by 2 percent every month. See the below rates for examples:

• Refinance on the 7th month and you receive 68% of your original upfront MIP back towards your new loan
• Refinance on the 8th month and you receive 66% of your original upfront MIP back towards your new loan
• Refinance on the 12th month and you receive 58% of your original upfront MIP back towards your new loan

As you move further and further away from the origination of the first FHA loan, the amount decreases, with the final refund ending at the 36th month, or 3 years after your loan origination. At that point you are eligible to receive 10% of your upfront MIP back in a refund.

The money refunded back to you is used towards the amount of the new upfront MIP for the FHA Streamline loan. This helps to decrease the amount of money you have to pay out of pocket in order to lower your interest rate and have a more affordable monthly payment. This refund pertains only to the upfront mortgage insurance premium you paid – it does not apply to the annual mortgage insurance premium paid throughout the life of the loan.

The final difference in MIP for the FHA Streamline refinance pertains to the cancellation of the mortgage insurance premium. In general, FHA MIP gets paid over the life of the loan, there is no cancellation. The exception to the rule, however, occurs when you have an LTV less than 90% at the time of refinance. Calculation of this figure occurs based on the original appraisal, unless you pay for a new appraisal (which is not required for the FHA streamline program). If your LTV is higher than 90% at the time of refinance, you will pay MIP for the life of the loan. If the value of your home is higher now compared to when you originally obtained the loan, it may be worth paying for a new appraisal to keep your monthly costs down.

The FHA Streamline process is a great program for homeowners currently with an FHA mortgage. If you obtained this mortgage a while ago, you might have a higher interest rate than is available today. Rather than going through the entire mortgage process again, including the rigorous qualification process, you can apply for a mortgage with any of the FHA Streamline lenders in your area and receive the benefits of a lower rate on a new FHA loan with very few requirements. This means even if your conditions are different, such as you have a different job or you have fewer assets, you will likely still qualify for the loan. Every lender has different requirements, however. If one lender turns you down, it makes sense to shop around with various other lenders to see which lender has the least investor overlays getting in the way of your mortgage approval.

FHA Streamline Mortgage Application Process

The application process for the FHA Streamline loan is very simple. You do not have to go through the lender you used for the original FHA loan – you can go to any FHA approved lender. The rest of the process is the same as any other loan application. You start by completing the loan application for the lender. This application includes the details of your life including your address, employment, income, and debts. Even though the FHA Streamline refinance does not technically require verification of any of these items, you must honestly disclose everything on the loan application. Some lenders will verify the numbers you give them, so make sure you are providing realistic information in order to avoid your loan getting declined due to fraudulent answers on the application.

The Underwriting Process

The underwriting process of the FHA Streamline refinance is different than a standard FHA loan in some respects. It still goes through an underwriter,who evaluates your financial status, but in most cases, the FHA Streamline lenders will not require new proof of your income, assets, or debts – they use your original numbers from your FHA case. In general, you will need the following documents:

• The mortgage note for your first FHA loan as the lender will need this to determine the interest rate you currently pay and the type of loan that you have (fixed or adjustable rate)
• The latest copy of your mortgage statement
• The HUD-1 from the closing of your first FHA loan (to obtain the FHA case number)
• The last two months’ worth of asset statements if you are not taking a no-closing cost loan so that you can prove you have the money to bring to closing
• Information about your employer including the contact name and phone number of the Human Resources department to verify your employment
• Proof of current homeowner’s insurance

The above documents are the minimum required documents by any lender as they are required by the FHA. Every lender has their own requirements, however, and may require you to provide verification of your income or clarification of any other items that seem questionable on your application. As a general requirement, the FHA allows FHA Streamline lenders to provide a refinance based on the above documents but if the lender is not comfortable or the investor buying the mortgages from the lender requires further verification, more documentation may be necessary.

The FHA Loan Closing Process

The closing process for the FHA Streamline loan is the same as any other loan. You will pay closing costs and will have to pay upfront mortgage insurance premium in order to get the loan. You will still go to the title company to close the loan; have to pay for a new title search and title insurance; and sign the documents all over again. The closing costs typically found on an FHA Streamline loan include:

• Origination fee (if the lender requires)
• Processing fee
• Underwriting fee
• Title search fee
• Title insurance
• Credit report fee
• Recording fee
• Tax service fee
• Upfront mortgage insurance (minus any refund)

The closing costs are negotiable with the lender, so don’t take it at face value if they seem high. You can negotiate lower costs or even a no-closing cost loan. In exchange for the closing costs, however, you will take a slightly higher interest rate. If you can afford the slightly higher payment and can still prove that you are saving adequate money each month, you may be able to get away without the need to bring any money to the closing. This is especially true if you are able to get an MIP refund, which is a refund of the upfront mortgage insurance premium you paid on your first FHA loan. This is only available to borrowers that took out their original FHA loan less than 3 years ago and is a prorated amount of the mortgage insurance you paid. The refund does not apply to the annual mortgage insurance premium you paid on the loan so far, however – that is non-refundable.

Will you Need an Appraisal for a FHA Streamline Refinance?

Perhaps the biggest question anyone has about the FHA Streamline loan is whether or not an appraisal will be necessary. In general, no appraisal is required and if it were up to the FHA alone, an appraisal would never be done. However, some lenders require an appraisal to ensure that the home is not too far underwater as sometimes lenders do not want to take on that risk since someone that is underwater is less likely to keep up with their mortgage payments. On the other hand, borrowers sometimes request the appraisal, especially if they know their home has increased greatly in value and their loan is now below the 90% loan-to-value ratio. If this is the case the mortgage insurance premium must be paid for 11 years and then is automatically cancelled, otherwise the MIP continues throughout the life of the loan.

FHA Streamline lenders can offer you a lower rate on your current FHA loan without the headaches that most loans cause. Remember to shop around with various FHA Streamline lenders as they each have something different to offer including different rates, terms, and requirements.

The VA Streamline loan for homeowners who currently have a VA loan is a great way to reduce your interest rate without a lot of work. VA Streamline lenders require very little verification from you, using most of the documents from your original loan to qualify you for the loan. The main idea behind this loan is that your interest rate is lowered enough that it increases your monthly disposable income. The VA is very concerned about veterans and their families having enough money to comfortably pay their living expenses while still being able to afford their mortgage payment. The exception to the rule on the VA Streamline loan is if you are refinancing from an adjustable rate loan into a fixed rate loan. In this case, your rate may increase slightly, but because it is a fixed rate, it is considered less risky for you and the lender.

VA Streamline Mortgage Application Process

Applying for a VA loan is similar to the process you underwent for the original loan. You can use any VA approved lender and even have the option to shop around with various lenders in order to obtain the best rate and lowest closing costs. In order to start the process, you will need to complete a standard loan application. The application will require you to disclose all of your information, including your address, place of employment, amount of income, and your current debts. In addition to the application, you will need to provide evidence of your entitlement to a VA loan. The original entitlement used for the VA loan you hold now is all that you need. Oftentimes, the lender can obtain the certificate on his own without any assistance from you, making the process even easier for you. The items you disclose on your application will not need to be verified in most cases, although some lenders might have their own requirements in terms of what they require for verification purposes.

VA Streamline Lender Underwriting Process

The underwriting process VA Streamline lenders use is different than the process used for the original loan. According to the VA, you do not have re-verify your income, assets, or even the value of your home – everything from the original loan may be used. However, some lenders are not comfortable with this scenario and require you to re-verify certain aspects of your loan application to ensure that you are still employed; make as much money as you say; and that your home is worth the amount you say it is worth. The advantage of the VA Streamline loan is that you are lowering your interest rate, which means a lower payment. Because this poses a lower risk than taking a loan with a higher balance or higher interest rate, many lenders will follow the guidelines of the VA and nothing more. All lenders will look for the following:

• Your credit history is used to determine the number of late payments you had in the last 12 months. The maximum amount allowed is one late payment. If you have more than one late payment reporting on your credit report, you will need to wait until a full 12 months has elapsed so that only one late payment is reporting.
• Your credit score may be evaluated by some lenders, with each lender requiring their own minimum score, but the VA does not require a specific score in order to qualify. The fact that you have a VA loan already is proof enough for them that you deserve the loan.
• Your appraised value from the original appraisal is used for qualification purposes on the streamline refinance. If you are very far underwater though – meaning you owe more than your home is worth, a lender may require an appraisal to see just how far underwater you are right now. Financing an underwater loan is often risky because you do not have any type of investment in the home, which makes walking away from the home much easier than if you had money invested in it.
• Proof of your income is not typically required for this loan. Some lenders like to see it and verify it, especially if you are shopping with different VA Streamline lenders than you used with your original VA loan. Since this is a new loan to them, they may want to verify for themselves that you can afford the loan.
• Proof that you occupy the home. The VA Streamline program is reserved for those that live in the home they used their VA entitlement on. If you are not living in the home, the only exception to the rule allowing you to use the program is if you had to move due to a job relocation. In that case, non-owner occupancy is allowed, but in general, you must provide proof that you live in the home in order to qualify.
• You cannot take any cash out of the equity of your home with this program. The loan amount is strictly reserved to the amount of the outstanding principal and any costs you can roll in (closing costs or funding fee). If you have a second mortgage, you will have to provide proof of subordination from the second lender as you cannot use the new loan to pay off your 2nd mortgage.

The Closing Process

Closing on a VA Streamline loan is similar to closing your original VA loan. You will have closing costs, including the VA funding fee, which is equal to 0.5% of the loan amount. In most cases, you can roll this cost into your loan amount along with your closing costs, as discussed above. The closing costs for the VA Streamline refinance are similar to any other type of closing. The amount and types of costs you pay will depend on the lender you use, but the general costs include:

• Processing fee
• Credit report fee
• Underwriting fee
• Title insurance
• Title search
• Origination fee
• Recording fee
• Tax fee

If you are using the same lender that provided your original VA loan, you may be able to negotiate the costs of the loan slightly. Or if you are using a new lender, you can ask to roll the closing costs into the loan or obtain a no-closing cost loan. This type of loan requires the lender to pay the closing costs in exchange for you taking a higher interest rate. If your original VA interest rate was high enough that you have enough room to lower the interest rate and still save money every month, you may be able to qualify for the no-closing cost loan.

It pays to shop around with various VA Streamline lenders to see who offers the best rates, closing costs, and programs. You might find one lender requires you to have an appraisal while another one does not. If you do not want to pay for the appraisal, you may want to shop around. In addition, some lenders will have stricter requirements regarding proof of your employment and income, so shop around until you find a lender willing to take your situation!

The FHA makes it possible to remodel your existing home or purchase a new home and remodel it with the proceeds of the loan. This program, called the 203K loan, is a great way to get the funds you need with only one loan for the purchase/refinance and remodeling of the home. The standard 203K loan process is rather complicated and can take a long time to complete, but the 203K Streamline process is much simpler and easy to complete. The difference between the two programs is the amount of money allowed for the remodeling. 203K Streamline lenders will maximize your changes at $35,000 in order to qualify for the program. If you are making non-structural changes to a home, $35,000 can allow a great deal of remodeling without the headaches of the standard 203K loan.

203K Streamline Rehab Loan Application Process

The application process for the 203K Streamline loan is different than any other loan type. The main difference is the approval needed for the money you will need for remodeling. Because there are no structural changes allowed on this program, you will not need an architect, engineer, or loan consultant. You will not need to draw up plans either, but you will need to provide a basic list of the changes and proposed contractors providing the changes to obtain loan approval. The appraiser uses the proposed changes to provide a current value as well as a proposed value with the new changes. Along with the list of changes, the lender will require the estimates from the contractors you plan to use in order to ensure the charges are within reason and that the contractors possess the qualifications to complete the work. Once you complete the application, 203K Streamline lenders will pull your credit to ensure you qualify for the loan. The minimum score allowed for this loan is 580 according to the FHA, but each lender has their own minimum that they allow, so shop around with various lenders if you find one that will not approve your credit score.

Underwriting Process for FHA 203K Streamline Refinancing

Once your application is approved and your credit score is high enough to move on with the process, you will move into the underwriting process. During this process, in addition to the proof of the changes you desire to make are the standard documents you will need to provide for the underwriter to determine the level of risk of your loan. These documents include:

• Proof of your income including pay stubs, W-2s, and/or tax returns for self-employed borrowers or borrowers on commission based income
• Proof of your debts, which most lenders use your current credit report to obtain, but if you have any debts not reporting on the credit report or not reporting correctly on the report, you should provide proof of those debts at the time of application
• Proof of discharge of any bankruptcies or foreclosures
• Proof that the home is going to be owner occupied
• Proof of assets for the down payment and/or required reserves

The 203K streamline lender then uses the documents you provided to determine your risk level. In general, they require the following conditions:

• The ability to put 3.5% of the purchase price of the home down
• A debt ratio lower than 43% on the back-end, meaning the total amount of your debts per month cannot exceed 43% of your monthly qualifying income
• All Chapter 7 bankruptcies must be discharged for at least 2 years
• All Chapter 13 bankruptcies must have proof of timely payments and the approval of the trustee to take on another debt
• All foreclosures must be discharged for at least 3 years unless you have certain conditions that allow for an exception, such as a serious illness or injury that made you unable to work and provide income to keep your home
•  Proof of no more than 2 30-day late payments on your mortgage for the last 12 months

Once the lender approves your financial conditions for the loan, they must approve the changes you propose for the home. A few changes that are allowed under this program include:

• Roof repairs and/or replacement
• Furnace or A/C repairs or replacement
• Plumbing repairs or replacement
  New flooring
• New paint inside or outside
• Changes to make the home more energy efficient
• Bathroom or kitchen remodels that are not structural
• Addition of a porch, patio, or deck
• Basement finishing without any structural changes
• Septic system repair or replacing
• Changes to make a home more accessible for a disabled person
• Window repairs or replacement
• Weatherizing

The 203K FHA Mortgage Closing Process

The main difference for 203K Streamline lenders occurs during the closing of the loan. The funds you receive to make the changes on your home are not handed over to you; the lender holds on to the funds until specific disbursement periods occur. These periods are determined during the initial loan process and receive your approval as well as that of the designated contractor to ensure that everyone is on the same page. The costs you incur for the 203K Streamline loan are similar to those of any other loan. You will pay costs that include origination fees, underwriting fees, processing fees, title insurance fees, recording fees, and even credit report fees. All of these costs must be paid at closing as the funds for the loan are used for remodeling your home.

At the closing, the funds to purchase the home itself are disbursed to the seller, as they would with any other loan. If you are refinancing your loan, the 1st mortgage you currently own will be paid off and the remaining funds will be put into an escrow account. If the contractor requested money upfront in order to start the remodeling, especially if money is needed for supplies, that amount of money is disbursed; the rest of the money is held in the escrow account. The total amount disbursed at the closing cannot exceed 50% of the funds reserved for the remodeling. The remaining funds are disbursed upon completion of the project. Typically, the lender will need to inspect and approve the changes before any money exchanges hands. The exception to that rule is if the changes are less than $15,000. If this is the case, you are able to release the money upon approval of completion of the project. You will need to sign a document releasing the funds and approving the work. The lender will ensure that there are no liens placed on the house from any contractors or subcontractors as well before the money is released.

203K Streamline lenders offer you the ability to make significant changes to your home without putting a lot of your own money down on the project. If you are purchasing a home, a 3.5% down payment and a maximum of $35,000 in changes can be yours with this easy to obtain loan. The FHA makes it very easy to become a homeowner and now you can own a home that has the changes you desire!