April 13, 2015
A reader asked us a question recently about applying for a refinance loan. “Do I mark “YES” on “Credit qualifying Streamline”?”
The term, “credit qualifying streamline” refers in this case to an FHA streamline refinance loan that requires a credit check. HUD 4155.1 states the following about credit qualifying:
“The purpose of the mortgage credit analysis is to determine
− a borrower’s credit performance
− a borrower’s capacity to repay the mortgage, and
− whether or not the borrower has sufficient funds to close, and
– limit collection actions or foreclosure. ”
Furthermore, as part of this process, HUD 4155.1 states:
“The lender must
• verify the borrower’s identity, and
• ask sufficient questions of the borrower to get a complete picture of the
− borrower’s financial position
− source of funds for the mortgage transaction, and
− intended use of the property”
In the case of refinance loans, the “source of funds” issue may not be relevant as it is with new purchase loans which require a down payment.
FHA Streamline Refinance loans may require a credit check for a variety of reasons. Lender standards may insist upon it, and borrowers who streamline refinance with an FHA Energy Efficient Mortgage loan that increases the monthly payment over a certain amount may also be required to credit qualify.
The reader’s question indicates that he or she was unsure whether the loan was credit qualifying or not. In cases like these it is best to ask the lender if that box is for the applicant to check (it may be for the bank’s use only) and whether or not the loan being applied for will require a credit check.
Do you have questions about FHA home loans? Ask us in the comments section. Your comment may be held for moderation.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: