FHA Streamline Refinance on Credit and Non-Credit Refinance
This guide covers FHA streamline refinance on credit and non-credit streamline refinance on FHA loans. Mortgage rates on 30-year fixed rate mortgages started to drop after skyrocketing to 8% from a low of 2.5% two years ago. In the past several weeks, the financial markets started selling off where rates backed off their highs. The Dow Jones Industrials started selling off driving the market into correction territory. A drop of 10% or more in the stock markets means the market is entering into correction territory.
Many nervous investors are worried that we will enter a Bear Market. Bear Markets is when the financial markets drop by 20% or more. Fear of recession and economic uncertainty is making the market very volatile.
Federal Reserve Board Chairman had a press announcement this morning at 11 AM EST about the reason why the Central Bank will not increase rates in the coming months. Fear of surging inflation and unemployment is sending fear in the marketplace. The Dow was all over the map this morning. Bad news comes with the good news. In the following paragraphs, we will cover FHA streamline refinance guideline on credit and non-credit refinance loans.
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Mortgage Rate Forecast
In general, when the stock market plummets as it has been, it plummets mortgage rates. Housing market forecast remains strong despite the surging rates, inflation fears, political unrest and volatile financial markets. This is good news for homeowners with high mortgage rates. HUD, the parent of FHA, has a fast-track streamline refinance loan program for homeowners with a current FHA loan. Per FHA Streamline Refinance, there are credit and non-credit qualifying streamline. FHA streamline refinance are a great home mortgage program for borrowers with a current FHA loan.
FHA Streamline Refinance on Net Tangible Benefits
Government and conventional loans are regulated. There are a lot of regulations when it comes to FHA, VA, USDA, and Conventional loans. FHA streamline refinance require lenders cannot originate and fund FHA streamline mortgages unless the borrower meets the net tangible benefit test. This law was created and implemented to benefit borrowers. Lenders cannot just trigger an FHA streamline refinance if the borrowers do not gain net tangible benefits by refinancing. One of the following three conditions need to be met for borrowers to be able to do an FHA streamline refinance: Combined rate reduction to benefit borrowers. A reduction in the term that benefits borrowers. Changing from an adjustable-rate to a fixed-rate mortgage.
FHA Streamline Refinance on Combined Rate Reduction
One of the net tangible benefits homeowners obtain when refinancing their home mortgages is getting a lower mortgage interest rate. Refinancing into a lower mortgage rate than the existing rate lowers the borrower’s monthly payment. Furthermore, borrowers can save tens of thousands of dollars over the course of the mortgage loan. Borrowers who plan on keeping their homes for a while can obtain net tangible benefits by refinancing an adjustable-rate mortgage to a fixed-rate mortgage. Borrowers can also refinance an adjustable-rate mortgage to another ARM but need to have a rate that is 1.0% to 2.0% lower.
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FHA Streamline Refinance on Changing Adjustable-Rate To a Fixed-Rate Mortgage
Many homeowners with an adjustable-rate mortgage can refinance their ARM to a fixed-rate mortgage. This is very common when the homeowner plans on keeping their home long term and not refinance. With volatile financial markets volatile, many homeowners are opting for this option. Going from an adjustable-rate mortgage to a higher fixed-rate mortgage is allowed. However, the fixed-rate mortgage cannot be higher than 2.0% to meet the net tangible benefits guidelines.
FHA Streamline Refinance on Reduction in Term
Borrowers will get a net tangible benefit if the term of the new mortgage is shortened by six or more months without their new housing payment being increased by more than $50 dollars. The combined P.I.T.I. and FHA MIP must go from a fixed rate, must decrease the new fixed-rate, or not increase more than 2 percentage points going from an ARM to a fixed rate.
FHA Streamline Refinance on Credit and Payment History
Under the eyes of HUD, which is the parent of FHA, the borrower with a current FHA loan with automatically qualify for a new FHA streamline refinance loan as long as they have been current with their FHA loan for the past 12 months. There is no appraisal required. There is no income documentation required. For credit or non-qualifying credit streamlines, the mortgage payment must be current through closing. Borrowers cannot have no lates in the past 6 months from assigning an FHA case number. No more than 1×30 late from months 7 through 12 from the case # assignment. There is no minimum credit score requirement on FHA Non-Credit qualifying streamline refinances.
Benefits of FHA Streamline Refinance Mortgages
In this section, we will cover the benefits of FHA streamline refinances. Borrowers get a refund of the current escrow account. Streamline refinances will generally lower the borrower’s monthly mortgage payments. Borrowers can defer up to two mortgage payments. In cases of an escrow shortage, a new escrow account will be set up with the correct amount for taxes and insurance. No income required on the non-credit qualifying streamline. No appraisal required. No minimum credit score. All candidates must make sure the borrower meets the net tangible benefit on FHA streamline refinances.
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The Only Timely Payment Required on Streamlines is Timely Mortgage Payments in The Past 12 Months
Borrowers can be late in any monthly payments with the exception of their current FHA mortgage payments. HUD already insures the home loan. Under the eyes of HUD, as long as FHA is insuring the current mortgage and the borrower has been timely for the past 12 months, why not approve a new FHA loan with lower interest rates. The home already has an FHA appraisal. The borrower already has proven themselves in making their FHA loan payments.
FHA Streamline Refinance Guidelines on Housing Payments
Here are the housing payment history requirements:
- The current FHA loan needs to be current
- The borrower needs to have been paying their current FHA loan on time
- Or at least six months of satisfactory mortgage payment history
- No more than one thirty-day late for the previous six months for all mortgages from the case number assignment date
- No minimum credit score requirement
- Can use a mortgage history with no score for a non-credit qualifying streamline
HUD allows incidental cashback on the new streamlines up to $500. Any amount greater or additional lender credit will be applied towards a principal reduction.
FHA Streamline Refinance Guidelines on Seasoning
To be eligible to do a streamline refinance, the borrower needs to have made at least six mortgage payments on their first FHA loan. Must have passed 210 days from the date of their home closing to be eligible. Borrowers can streamline refinance during the Chapter 13 bankruptcy repayment plan. Need to obtain Chapter 13 Trustee approval. Any FHA mortgages during Chapter 13 Repayment Plans are manual underwriting. There are no seasoning requirements after the discharge date of bankruptcy.
Non-Credit Qualifying FHA Streamline Refinance
Borrowers can add a borrower and/or borrowers to the loan without income, but cannot remove a borrower. It does not require income. Only a verbal verification of employment is required to make sure that the borrower is just employed with no income verification. Streamlines do not require full credit report and analysis. No home appraisal is required.
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Upfront HUD Mortgage Insurance Premium (UFMIP)
Upfront Mortgage Insurance Premiums are currently 1.75% of the base loan amount. Generally, the upfront FHA MIP is financed and rolled into the FHA loan balance. Here are the FHA MIP Mortgage Guidelines:
- For loan-to-values under 95% LTV with a term greater than 15 years: 0.80% of the total loan amount with a duration of 11 years
- Loan-to-value greater than 95% greater than 15 years: 0.55% of the total amount for the life of the loan
- For a term with 15 years or less with at least 90% loan-to-value, 0.45% with 11 years duration
- Loan-to-values greater than 90% for 15 years or less, 0.70% for the life of the loan
FHA Streamline Refinance on Upfront Mortgage Insurance Premium Refund
Any borrower who has an FHA loan and is refinancing to another FHA mortgage within the first three years from the closing date will get a refund credit. The FHA MIP refund will be credited to the new FHA loan. John Strange of Gustan Cho Associates is an FHA and VA streamline refinance expert. John Strange said the following about the calculation of FHA MIP refunds and escrow refunds: Look at the chart below:
Costs and Fees on FHA Streamline Refinance Loans
There is no cost to the borrower with FHA streamlines. All closing costs on FHA streamline refinances are covered by the lender through a lender credit. Borrowers can often skip one to two payments on streamlines. Limited documentation required. There is no verification of employment, income docs, tax returns, and other docs on streamlines. Most FHA streamlines at Gustan Cho Associates close in 21 days or less. The borrower does not have to go to the title company. Borrowers can close in the comfort in their homes. The title agent will travel to your place of residence and/or work. For more information about streamlining your current FHA loan, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.
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