When you examine your streamline refinance options, it’s easy to get confused over the difference between lender requirements and FHA refinance loan standards. FHA Streamline Refinance Loans are intended for borrowers with existing FHA mortgages and can be done on any type of existing FHA loan–fixed rate, adjustable rate, graduated payment mortgage, etc.
Some borrowers want to know if there is a new credit check or appraisal required. There is no short answer to this because while FHA loan rules do not demand a new appraisal, the lender may require one. The credit check issue also depends on a variety of circumstances including the type of refinance transaction (fixed rate to adjustable rate, for example) and how long the borrower has owned the property.
FHA loan rule spell out some of the circumstances under which a credit-qualifying streamline refinance would be required. They include:
A credit qualifying streamline refinance must be considered
–when a change in the mortgage term will result in an increase in the mortgage payment of more than 20%
–when deletion of a borrower or borrowers will trigger the due-on-sale clause
–following the assumption of a mortgage that occurred less than six months previously, and does not contain restrictions (i.e. due-on-sale clause) limiting assumption only to a creditworthy borrower, or
–following the assumption of a mortgage that occurred less than six months previously, and did not trigger the transferability restriction (that is, the due-on-sale clause), such as in a property transfer resulting from a divorce decree or by devise or descent”.
Lenders are free to require a new appraisal and/or credit check where that financial institution’s standards require it above and beyond the FHA loan minimums. FHA loan requirements for Streamline Refinancing include the following:
“On the date of FHA case number assignment,
–the borrower must have made at least six payments on the FHA-insured mortgage being refinanced
–at least six full months must have passed since the first payment due date of the refinanced mortgage, and
–at least 210 days must have passed from the closing date of the mortgage being refinanced”.
Do you have questions about FHA home loans or refinancing loans? Ask us in the comments section.