Streamline loans are a great way to get the financing you need without the hassle of a fully documented home loan. The FHA streamline and VA streamline programs make it very easy to refinance from one FHA loan to another or one VA loan to another with very little new documentation. The FHA 203K Streamline line is a simplified version of the full 203K loan, making small changes to a home very simple and affordable.
FHA Streamline Refinance Mortgage
If you already have an FHA loan and wish to lower your rate because they have dropped since you originated your mortgage, the FHA Streamline program is the perfect choice. This program enables you to avoid going through the long, arduous mortgage process all over again while still obtaining a lower rate to save you money every month. The documentation requirements for this loan are very simple according to the FHA. You do not need to provide any new income documents nor a new appraisal – all of the original documents may be used for the new program. However, certain FHA lenders will require new qualifications depending on your situation, as a part of their lender overlay. Lenders that do not require new documentation make it possible to refinance even if you changed jobs, your property value dropped, or you have fewer months of reserves.
The largest concern regarding the FHA Streamline program is your housing history. Lenders will either pull your credit or look at your housing payments within their bank if you are using the same lender for the refinance. In order to qualify, the last 3 months of your housing history must be on time and there cannot be more than one late payment in the 9 months prior to the last 3 months. In short, one late payment is allowed in the last year, but it cannot be within the last 3 months.
The best time to apply for the FHA Streamline loan in order to obtain the lowest rates is when the economy is doing poorly because FHA rates directly coincide with the rate of inflation. The better off the economy is at the moment, the higher FHA rates become, but the worse the economy does, the lower FHA rates fall. This is because this loan program is meant to help stimulate the economy; during good times, these loans are not as high in demand, but in bad times, they are greatly needed.
All FHA Streamline loans will require MIP upfront and on an annual basis. The rates differ depending on when you originated your first FHA loan. In general, if your current FHA loan originated before June 1, 2009, your MIP rates will be .01 percent of the new loan amount as an upfront cost and .55 percent of the new loan amount on an annual basis (divided equally among 12 payments). If you obtained your FHA loan after June 1, 2009, your MIP rates will coincide with today’s current rates of 1.75 percent of the new loan amount upfront and .85 percent of the new loan amount on an annual basis (divided equally among the 12 month payments).
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FHA 203K Streamline Rehab Loan
The FHA 203K Streamline loan is another loan offered by the FHA, but with a twist. This loan makes it possible to make changes to your home and include the costs in your first mortgage used to purchase or refinance the home. This loan allows you to make changes that cost up to $35,000 that are not structural. This is a simplified version of the full 203K which does allow structural changes and does not have a dollar amount maximum; the maximum for the full loan depends on the value of your home and the changes you plan to make. The streamlined version of the 203K loan allows you to make quite a few changes with very little work on your part. You do not need to use a loan consultant and will not need any blueprints or architectures involved.
Applying for the FHA 203K Streamline program is different than standard FHA loans because of the changes you will make to the home. The lender needs to approve the changes, none of which can change any structure of the home. Along with the desired changes, you will need to submit estimates from a few contractors for the lender to approve. The lender and the appraiser will then come up with the proposed value for the home after the completed changes. The lender will also evaluate the ability of the chosen contractors to complete the job based on their qualifications.
Aside from the changes you wish to make for the home and the contractor’s qualifications, you will need to qualify financially for the program. The requirements are as simple as they are for a standard FHA loan, however. You will need a credit score of at least 580, enough money to put down 3.5 percent of the purchase price, a debt ratio no higher than 43 percent on the back-end, and 2 or less late housing payments in the last 12 months. If you have any special circumstances, such as a BK or foreclosure, you will have to wait the specified time before applying for this loan.
Most of the allowed changes on the Streamline 203K program are cosmetic, with the exception of things like adding a porch or patio; fixing or replacing utilities, such as a furnace; making energy efficient changes; or replacing windows. Common changes on this program include changing out the flooring, painting the interior or exterior of the home, and non-structural changes to a kitchen or bathroom.
VA Streamline Refinance Mortgage
If you currently have a VA loan and wish to lower your rate, the VA Streamline loan is a great way to accomplish this goal. Typically, the original documents used for qualifying will apply to the new VA loan. The VA is most concerned with the amount of money you save each month by lowering your interest rate. The goal behind a lower payment is to increase your monthly residual income, which is what the VA uses to qualify borrowers for the streamline loan. The goal behind the VA program is to provide veterans and their families with affordable housing that enables them to live comfortably financially without struggle. The streamline program is available to those that could increase their disposable income by lowering their rate or refinancing from a risky adjustable rate loan to a fixed rate program.
The largest concern when applying for the VA Streamline loan is your credit history – not the score. You are not allowed to have more than one late payment reporting in the last 12 months on your housing or other debt history. If you do have more than one late payment, you will have to wait 12 months before you can apply for this program. Other than your payment history, the lender is able to use your original qualification documents including your income and appraisal. The lender will need to make sure you still own entitlement to the VA program, which they can supply themselves. They will also need to determine that you will continue to live in the home you wish to refinance with this program as it is only available on owner occupied properties.
Just like FHA loans, VA loan rates follow the market. The worse off the economy is, the lower VA Streamline rates will fall, and the better off the economy is, the higher VA rates will go. This is because, just like FHA loans, VA loans are meant to stimulate the economy and help the veterans that served our country by providing them with an affordable way to purchase and own a home. As is the case with any loan, however, your individual qualifying factors will determine how much different your interest rate is compared to the standard VA rates offered. The riskier your loan profile, the higher your interest rate will go.
The VA Streamline loan, just like any other VA loan, requires the payment of a funding fee, which you pay at the closing. If you are unable to put up the cash required for this fee, which is 0.5 percent of the loan amount, you can roll it into the loan without hurting your LTV or current loan amount. In fact, you can even roll your closing costs into the loan in order to make it possible to bring no cash to the closing table, yet still lower your interest rate and increase your disposable monthly income.
All of the government loan programs offered have amazing benefits that you will not find with conventional financing. The government backs each of these loan types, but does not fund the loans – they simply provide a guarantee that they will back the lender up should you default on your payments in the future. These loans are not just for first-time homebuyers, but are for anyone that needs affordable financing to purchase, refinance, or fix up their current home or a home they wish to purchase.
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