HUD Guidelines On FHA Streamline Refinance Mortgages

This Article Is About HUD Guidelines On FHA Streamline Loans
HUD Guidelines On FHA Streamline Refinance Mortgages is very simple and can be closed in two weeks: Here is the HUD Guidelines On FHA Streamline Requirements:

  • No appraisal required
  • No income verification required so debt to income ratios do not matter
  • No credit requirement nor credit scores
  • All that is required is that the borrower be timely on just their current FHA Loan monthly payments for the past 12 months
  • Borrowers can have derogatory credit and late payments on all other credit tradelines with the exception of their current FHA home loan
  • HUD Guidelines On FHA Streamline Refinances requires very little paperwork

Most banks and lenders have overlays but Gustan Cho Associates specializes in no overlays on government and conventional loans so we just follow HUD Guidelines On FHA Streamline.

Important HUD Guidelines On FHA Streamline Refinancing Loans

Verification of Employment is not a requirement under HUD Guidelines On FHA Streamline:

  • Verification of Income is not a requirement
  • Verification of Credit Scores is not required under HUD Guidelines On FHA Streamline Refinances

A new home appraisal is not required on FHA Streamline Refinance mortgages.

No Credit Score Requirements On Streamlines

What Are The Credit Requirements Under HUD Guidelines On FHA Streamline
  • The only credit requirements under HUD Guidelines On FHA Streamline Refinance is that borrowers need to be timely on their mortgage payments for the past 12 months
  • Borrowers can be late on car payments, credit card payments, installment loans, and other types of credit and still qualify for FHA Streamline Refinance

BUT borrowers need to be timely on their current FHA Loan for the past 12 months.

Seasoning Requirements Between Refinancing FHA Loans

Mortgage interest rates are determined by credit scores.

  • Homebuyers with 580 credit scores will get higher mortgage rates than borrowers with 700 FICO credit scores
  • Homebuyers who purchase a home with 580 credit scores will get higher mortgage rates and once their credit scores improve, they will want to do an FHA Streamline Refinance with a lower credit score

FHA Lenders under FHA Guidelines require that borrowers make six payments from the closing of their home purchase in order to qualify for a Streamline Refinance Mortgage.

Reasons To Refinance With Streamline

Here are the seasoning requirements on streamline refinances

  • Six months of payments from the time of their home closing
  • 210 days have passed from the borrower’s most recent home closing date

Timely payments on all of their mortgage payments for the past 12 months:

  • Or six months if it was a recent home purchase

Borrowers can apply and get approved for a streamline refinance FHA Loan:

  • However, they cannot close the mortgage until after the 210th day

What Are The Net Tangible Benefit Requirements On HUD Guidelines On FHA Streamline?

In order to do any refinance mortgages, there needs to be a net tangible benefit to the borrower or the lender is not allowed to proceed with a refinance mortgage. One of the borrowers will need to state the reason why they are proceeding with a refinance mortgage.

Here are what borrowers cannot do with a streamline refinance:

  • Borrowers are not allowed to do a cash-out loan with an FHA Streamline Refinance 
  • Borrowers who need cash-out refinance mortgages need to do a full refinance mortgage and the maximum cash out allowed is 85% Loan To Value
  • All original borrowers, including non-occupant co-borrowers, need to be on the new streamlined loan

Main borrowers cannot add new co-borrowers or take out old co-borrowers with a streamline loan.

Closing Costs On FHA Refinance Mortgages

Homeowners who go through traditional refinance mortgages are used to rolling in the closing costs to the balance of the mortgage loan.

  • However, since FHA Streamline Refinance mortgages do not require home appraisals, HUD does not allow loan balances to be increased
  • Therefore, borrowers are not allowed to roll closing costs into their new FHA Loan

Here Is How Closing Costs On FHA Streamline Refinances Work:

  • The new mortgage balance is restricted as follows:
  • Principal Mortgage Balance plus Upfront FHA MIP
  • Other closing costs such as pre-paid, title charges, transfer stamps, legal fees, homeowners insurance, recording charges, and other costs/fees either needs to be paid by the borrower or credited by the lender via a lender credit
  • All closing costs are credited by lender credit by refinance lenders
  • Borrowers can normally skip one or two mortgage payments on FHA Streamlines

Borrowers may be entitled to partial refunds on their upfront FHA mortgage insurance premium when they do a streamline refinance.

HUD Guidelines On FHA Streamline And Role Of FHA

The Federal Housing Administration is like a private mortgage insurance company. HUD is the parent of FHA.

Here is the role of FHA:

  • FHA’s role is to promote homeownership to hard-working Americans
  • FHA is not a lender but a government mortgage insurance agency
  • It insures FHA Loans that are originated by private mortgage companies if borrowers default on their FHA insured mortgage loans
  • FHA is the most popular mortgage loan program today with low credit and debt to income ratio requirements
  • Homebuyers and refinance borrowers do not have to pay outstanding collections and charge off accounts to qualify for FHA Loans
  • Homebuyers can qualify for FHA Loans with a 3.5% down payment

Homebuyers with credit scores under 580 and down to a 500 FICO can qualify for an FHA loan with a 10% down payment.

Qualifying For An FHA Loan With Lower Credit Scores

To qualify for a 3.5% down payment FHA mortgage, 580 FICO credit scores are required

  • Homebuyers with under 580 FICO need 10% down payment and refinance borrowers need 90% Loan To Value
  • HUD allows up to 46.9% front end DTI and 56.9% back end DTI on borrowers with at least 620 credit scores
  • Under 620 FICO, the maximum allowable DTI is 43%
  • No Waiting Period After Chapter 13 Bankruptcy Discharged Date
  • Borrowers can qualify for FHA Loan one year into a Chapter 13 Bankruptcy repayment plan with Trustee Approval
  • Two year waiting period after Chapter 7 Bankruptcy discharged date
  • Three year waiting period after foreclosure, deed in lieu of foreclosure, and short sale

Non-QM Loans available for borrowers who do not meet the waiting period after bankruptcy and foreclosure:

  • No waiting period after bankruptcy and foreclosure with non-QM loans

Qualifying For FHA Streamline Refinance

If you have a current FHA Loan and want to see how much money you can save with an FHA Streamline Refinance, contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us [email protected] Remember that homeowners can skip one to two month’s mortgage payments and save on their monthly mortgage payments with a streamline refinance. Plus, we cover all of the closing costs with a lender credit.

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