The FHA or Federal Housing Administration has used the FHA Streamline as a primary tool to provide insured mortgages for families to purchase or refinance homes or properties.
The Streamline(K) is a simplified version of the 203(K) to address specifically to smaller needs of individuals in terms of repairing homes and properties. Understanding the features and characteristics will help marketing for FHA Streamline refinances easier and more effective.
Basic Requirements
1. Get The Necessary Items.
The streamline pertains to the amount of underwriting and documentation to be processed by the mortgage company, costs may still be involved. Some of the needed items include the FHA-insured mortgage to be refinanced, current (not delinquent) mortgage to be refinanced, no cash taken out on mortgages refinanced via the streamline refinance process and the refinance leading to a lower borrower's monthly principle and interest payments.
2. Learn How Refinancing Is Offered.
Streamline refinances may be provided by companies differently. Some offer "no cost" refinances which do not require out-of-pocket expenses from the borrower. A higher interest rate on the new loan however, may be charged compared if the borrower paid or financed the closing costs in cash. All closing costs incurred during the transaction are paid by the company with this type of premium.
Closing costs may also be included into the new mortgage amount for some companies marketing for FHA streamline refinances. This is possible if an appraisal confirms that there is sufficient equity in the property. Streamline refinances can be done without the use of appraisals, but the new loan amount cannot go beyond the currently owed amount.
Investment properties or properties which the borrower does not consider as a principal residence can be refinanced without an appraisal required. Closing costs, in effect, may not be included in the new mortgage amount.
The "no cash-out" loan can be used to buy out the equity of an ex-spouse as long as it is documented in the divorce papers. The equity is considered indebtedness. Properties purchased not more than one year ago and are not FHA loans can lead to the amount being the appraised value plus closing cost, or the original sales price plus closing cost.
Searching for Benefits
3. Identify The Advantages.
FHA refinancing programs include repairs completed after closing with loan proceeds. It offers low down payment with a minimum investment of only 3%. Other advantages include loan fees that may be financed, the mortgage being FHA-insured, no inspection required, no general contractor required, being a great tool for REO or Real Estate Owned properties, mortgage amount may be increased when combining Streamline(K) with EEM or Energy Efficiency Mortgage and having a single loan amount for the purchase, refinance and repairs.
FHA streamline is not for purchase transactions only but can also be used for the refinance of an existing loan or purchase or HUD REO property. The owner or homebuyer is responsible for all repairs from the proceeds of the loan. The repairs can start after the loan is closed.
Since the repairs are only minor, a general contractor is not required. You can hire one or perform the tasks yourself, provided you present to the lender your ability to perform the needed refinancing properly. An FHA inspector is not required provided that the homebuyer can show receipts or proof of satisfactory completion.
4. Identify the Necessary Repairs.
Marketing for FHA streamline refinances require you to know the type of items eligible for repairs. Inclusions are replacement or repair of roofs, gutters and downspouts, HVAC system upgrade or repair, plumbing and electrical system repair, replacement or upgrade, repair or replacement of existing flooring, minor remodelling, exterior and interior painting, weatherization like storm doors and windows and insulation, appliances not exceeding $2,000 in total after the required minimum of $3,000 of eligible items for repair are satisfied, non-structural improvements for disabled person accessibility and basements and exterior decks.
Items that require structural modification or major rehabilitation are not included. If major repairs are needed, the homebuyer should opt for the regular FHA 203(k) program. A maximum of 2 payments may be made to the homeowner or contractor during refinancing.
Any FHA-approved lender can process the mortgage loan.
Most of the loan fees like title update costs, permit costs and origination can be financed in to the loan. Always point these out when marketing for FHA streamline refinances.
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