FHA refinance loan advice includes a variety of recommendations about creditworthiness. For example, you should make sure you have 12 months of on-time payments on your credit record before you apply for a refinance loan, especially when applying for cash-out refinancing loans.
But what about the timeliness of your original mortgage payments? Borrowers who have made all their payments on time and are about to refinance may wonder if, because of the timing of an FHA refinance transaction, two payments might be required in a single month. Can’t the borrower skip the final payment on the old mortgage before the new one kicks in?
The rules for refinance loans found in HUD 4155.1 Chapter Three instruct the lender to make sure the borrower is current and paid up all the way through to the final month of the old mortgage:
“The borrower must be current on the loan being refinanced for the month due for the month in which he/she closes. If the borrower is closing on April 8, he/she must have made the March payment within the month of March, and the April payment by closing. The April payment may be included in the payoff amount at closing”
Your loan officer is not permitted to let you skip payments on the old loan. One reason for this? According to Chapter Three, “When the new mortgage amount is calculated, FHA does not permit any mortgage payments ‘skipped’ by the borrower to be included in the new mortgage amount. The borrower must either make the payment when it is due, or bring the monthly mortgage payment check to settlement.”
Speak to your loan officer if you need to refinance a delinquent mortgage loan, which may have a different set of procedures and requirements than an ordinary mortgage loan application.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.