June 30, 2011
Real estate can be a confusing business for those not used to dealing with the daily ins and outs of the industry. But a first-time FHA borrower isn’t the only one likely to have some initial trouble navigating the rules and regulations covering real estate transactions, FHA loan requirements and other issues. A first-time applicant for refinancing also has plenty of questions about the process.
One of the most frequently asked questions about refinancing involves an important ownership issue. Suppose a borrower purchased a home with an FHA insured loan, and either had the loan assumed, added someone to the title, or otherwise brought another person into property ownership without having them named on the original FHA loan? Can someone apply for an FHA refinancing loan if they own the property but was not named on the original note?
The short answer is yes. As long as a borrower has legal title to the property they want to refinance with an FHA loan product, they are permitted to apply. Borrowers don’t have to hold an FHA guaranteed mortgage loan to apply for FHA refinancing.
The real issue is what type of refinancing loan a borrower can apply for; the borrower who purchased a home with an FHA mortgage and decides to refinance it may be eligible for FHA streamline refinancing such as an Interest Rate Reduction Refinancing Loan. But the borrower who did not have a previous FHA loan would have to apply for credit-qualifying FHA refinance loans instead of a streamline loan.
Streamline loans use the previously submitted credit qualifying data in many cases. Some streamline loans may require additional credit checks depending on the circumstances, but the no-credit-check FHA refinancing loan is an option if the borrower chooses those terms and conditions.
Someone with legal title to the property but not named on the original FHA home loan paperwork will be required to meet typical FHA standards for a new loan–credit history must be submitted and other customary loan application paperwork. The new borrower isn’t “penalized” for not being on the original mortgage, it’s simply a case of applying for the new line of credit.