HUD FHA Streamline Mortgage Guidelines For FHA Loans

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This BLOG On HUD FHA Streamline Mortgage Guidelines For FHA Loans Was UPDATED On January 15th, 2019

At Gustan Cho Associates we specialist in FHA mortgages, including FHA streamline refinances.

  • While it is true, the refinance boom is officially over that began in 2008, we are still completing many FHA streamline refinance loans
  • This is a great program for borrowers currently in an FHA mortgage to take advantage of a lower interest rates
  • There are very specific guidelines put in place by HUD to complete an FHA streamline
  • In this blog we will discuss the qualifications for an FHA streamline and the FHA streamline mortgage process

How Does HUD FHA Streamline Mortgage Process Work

In short, under HUD FHA Streamline Mortgage allows a borrower to refinance their current FHA loan into a lower interest rate

  • Doing so, homeowners save money
  • One of the best features of the FHA streamline is you do not need an appraisal
  • A great option if you are underwater on your mortgage
  • You can even complete an FHA streamline process without a full tri-merge credit report being pulled

HUD FHA Streamline Mortgage Qualification Requirements

Below are a few basic qualifications: 

  • The mortgage must already be insured by the FHA 
  • The mortgage must be current and not delinquent 
  • You must pass a net tangible benefit worksheet; the loan must save you money per HUD guidelines 
  • You may not receive additional cash out in excess over $500

HUD FHA Streamline Mortgage Ads By Lenders

Money lenders advertise FHA streamline mortgages as a “no-cost” refinance.

  • In part, this is because you do not have to pay for an appraisal to complete an FHA streamline
  • What they are not telling you is, they are offering you a higher interest rate to cover the closing costs and mortgage fees
  • Meaning if you paid these out-of-pocket, you would get an even lower interest rate
  • Unlike a rate and term refinance, with an FHA streamline you may NOT roll closing costs into the total mortgage amount
  • Is there a catch?
  • No, not really
  • It is a win-win for both sides

You save money on your mortgage each month.  FHA gets paid with the mortgage insurance premiums from on the new mortgage.  

Credit And Income Qualification Requirements

What are the qualifications? 

  • Technically there is no credit score requirement
  • Although you will receive better terms if you choose to have your credit pulled
  • Homeowners must have made at least six payments on your current FHA mortgage before being eligible to complete an FHA streamline
  • If you have been in your mortgage for longer than 6 months, the mortgage company must verify at least the last 12 payments have been on time
  • The mortgage company can do this through a full “tri-merge” credit report or a “mortgage only” credit report
  • The “mortgage only” credit report simply pulls your mortgage tradeline along with your credit scores, allowing the lender to verify on-time mortgage payments

Before you may enter into an FHA streamline, at least 210 days must have elapsed from your closing date. Besides on-time payments, you must pass a net tangible benefit worksheet. 

Net Tangible Benefit Requirements On HUD FHA Streamline Mortgage

Net tangible benefit: 

  • Please reference the image below, typical rule of thumb is you must lower overall interest rate by at least .5%
  • This includes monthly mortgage insurance premiums
  • Older FHA mortgages may no longer carry mortgage insurance, making it tough to qualify for a streamline refinance
  • Lowering the rate by at least .5% is becoming more and more difficult as interest rates are on the rise
  • Majority of FHA borrowers are currently on a fixed-rate mortgage

If you are on an adjustable-rate, please reach out to us directly at 630-659-7644 to go over your net tangible benefit requirements.  

fixed rate versus new combined rate

The credit of photo: https://www.hud.gov/sites/documents/40001HSGH.PDF  

Maximum Loan Amount Per HUD FHA Streamline Mortgage Guidelines

Maximum Loan Amount Calculation: 

As stated above, you may not receive additional cash out during a FHA streamline Mortgage in excess of $500. There is a specific worksheet that must be filled out by the mortgage company, below is an example of how this calculation is completed: 

PayOff figures good through

The bottom figure, TOTAL New FHA Mortgage will be the amount you owe on the new loan. It is best to let us complete these calculations for you.  

Starting HUD FHA Streamline Mortgage Process With Direct Lender With No Overlays

How to start the FHA Streamline process?  

An FHA streamline is one of the easiest mortgages to closed due to the minimum requirements of documentation. What do you need to send to us? 

  • Current FHA Mortgage Statement 
  • Mortgage NOTE (in your closing package) 
  • 60 days bank statements – if you are paying closing costs out of pocket 

From that point, we will decide if it’s best to use a “credit qualifying” or “non-credit qualifying” FHA streamline. Many of our clients come to us to buy a home when their credit scores are not quite where they wanted them to be. We are still able to close their mortgage, and we typically complete in FHA streamline six payments down the road.

When Will Credit Scores Improve

Once you have a mortgage reporting on your credit report with on-time payments, your credit score will skyrocket. At that point, you should qualify for a lower interest rate (depending on the market climate). We have many success stories with troubled clients qualifying for FHA mortgages without lender overlays. Please read or consumer reviews! For more information on FHA streamline there any other mortgage questions please reach out directly to Mike Gracz. You can call or text 630-659-7644 or text for faster response. Or send an email to mgracz@gustancho.com.   

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