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Guide to FHA, 203K, and VA Streamline Loans from
Approved Mortgage Lenders
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).

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.

T O L E A R N M O R E
C L IC K HE R E

Justin McHood is Americas Mortgage
Commentator and has been providing
Mortgage commentary for over 10 years.
INFORMATION PROVIDED BY:
Justin McHood
Mortgage Commentator

LEARN MORE ABOUT MORTGAGE COMMENTATOR:
MORTGAGECOMMENTATOR.COM
FACEBOOK.COM/MORTGAGECOMMENTATOR
@MORTGAGECOM_

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