FHA Streamline: No Verification of Income, Credit, or Appraisal

FHA Streamline: No Verification of Income, Credit, or Appraisal | by Jim Catalano

What is an FHA Streamline?

The FHA Streamline is a refinance home mortgage loan that is available to homeowners with existing FHA mortgages. The streamline program does what it signifies; it streamlines or simplifies the loan process by waiving documentation such as credit score verification, appraisal of the property, and income and employment verification you would typically provide to obtain a mortgage loan approval.

FHA Streamline Refinances are the quickest and simplest way for FHA-insured homeowners to refinance their home mortgages with today’s near historic low-interest rates.

Many homeowners not only take advantage of low mortgage interest rates but they also use this program to reduce their FHA mortgage insurance premiums (MIP).

How does the FHA Streamline work?

One of the great features of the FHA Streamline Refinance program is the fact that it does not require a home appraisal. Instead, it uses your original purchase price as your home’s current value, regardless of what your home is worth today. Therefore there is no waiting for an appraisal or incurring a penalty for not having the loan-to-value necessary on many loan programs.

Another factor that makes the FHA Streamline a big hit is that it is pretty easy to qualify. To help U.S. homeowners the FHA abolished most of the typical verifications required for mortgage loan approval. The guidelines required no employment verification, no income verification, and no credit score verification.

When you think about it, essentially you can be out of work, have no income, have derogatory credit or a low credit score, and have no home equity and still be approved for an FHA Streamline Refinance.

Why is this loan possible?

You are probably saying this is crazy, why would FHA offer this loan program?

To answer that it’s important to understand the role of FHA in home mortgages. FHA’s primary role is to “insure” home mortgages, not make them. Therefore FHA does what it can to help as many people as possible qualify for today’s lower mortgage interest rates and therefore lower mortgage payments, save money, and lead to fewer mortgage loan defaults.

What is required to be eligible?

The most important qualifying factor on the Streamline Refinance program is that homeowners must have a perfect payment history on their existing home mortgage for the last three (3) months. 30-day, 60-day, and 90-day lates are not allowed. One (1) mortgage late payment is allowed within the previous 12 months and loans must be current at the time of closing.

The FHA also requires that borrowers make six (6) mortgage payments on their existing FHA loan and that 210 days must pass from the most recent closing date to be eligible for a Streamline Refinance.

The FHA also prohibits increasing a Streamline Refinance’s loan balance to cover associated mortgage loan charges. The new mortgage loan balance is limited by the current principal loan balance plus (+) the upfront Mortgage Insurance Premium. All other costs such as origination fee, title fees, escrow fees — must be either (1) Paid by the borrower in cash at closing, or (2) credited by the lender in full.

Let’s see what we can do for you.