Refinance Mortgage Guidelines

Refinance Mortgage Guidelines For Mortgage Programs

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Refinance Mortgage Guidelines For Mortgage Programs Was UPDATED On April 15th, 2019

Many homeowners do not realize that by doing a refinance mortgage loan can save them thousands of dollars over the life of their home loan.

There are Refinance Mortgage Guidelines various different mortgage programs:

  • There are many types of refinance mortgage programs
  • Depending on the individual homeowner, a particular program may help them reduce their monthly payment and save tens of thousands over the term of their home loan
  • Many homeowners realize that the mortgage process can be a major task

But if it helps them save money every month, they should really explore their options.

Refinance Mortgage Process

There are various types of refinance mortgage loan programs and Refinance Mortgage Guidelines:

  • Those with higher mortgage rates may want to just do a rate and term refinance
  • Homeowners with equity but many bills with high interest may want to do a cash-out refinance mortgage loan and consolidate all of their bills
  • Cash-out refinance mortgage loans are great for homeowners who are drowning in debt with many credit cards with very high-interest rates
  • Or homeowners needing cash for one reason or another
  • Lenders will charge a slightly higher interest rate for cash-out refinance mortgage loans
  • Other homeowners may want to shorten their term
  • Or some with 15 year fixed rates may want to extend it to a 30 year fixed rate mortgage
  • Others who have a 30 year fixed rate may want to refinance to a 15 year fixed rate refinance mortgage at a much lower interest rate

Others who have an FHA loan may want to refinance to a conventional loan to avoid the hefty monthly FHA mortgage insurance premium.

Refinance Mortgage Guidelines And Process

The refinance mortgage application process is the same as the home purchase mortgage application process unless they are VA or FHA Streamline Refinance:

  • Homeowners need to complete a four-page official 1003 mortgage application
  • Borrowers need to qualify for credit on the particular loan program they are applying
  • Need to provide and submit documents like the following:
    • two years tax returns
    • two years W-2s
    • 30 days recent paycheck stubs
    • 60 days bank statements
    • other documents that are needed to underwrite the mortgage loan application
  • However, there are refinance mortgage loan programs where not all documents are needed
  • We will cover in the following paragraphs

FHA Streamline Refinance Loans

For homeowners who currently have an existing FHA Loan, they can qualify for an FHA streamline refinance mortgage. This fast track refinance mortgage is available for borrowers with a current FHA Loan. New appraisal or income verification is required:

  • The only requirement is that the homeowner be timely on their current FHA mortgage payments for the past 12 months
  • Borrowers need to be employed full time but verification of income or employment is not required
  • FHA requires borrowers to be employed
  • There is no income verification and no paycheck stubs need to be provided
  • Borrowers can be late on any monthly credit obligations
  • However, cannot be late on current mortgage payments for the prior 12 months
  • Cash-Out Refinance Mortgages are not allowed with Streamlines

FHA streamline refinance mortgages are only for rate and term refinances.  Borrowers cannot do a cash-out refinance with an FHA streamline refinance.

VA Streamline Refinance Mortgage

Similar to the FHA streamline refinance mortgage program,  homeowners with a current VA mortgage loan can take advantage of the VA streamline refinance program.

  • The VA streamline refinance program is also known as IRRRL
  • IRRRL stands for VA Interest Rate Reduction Refinancing Loan
  • Similar to FHA Streamline refinance, the IRRRL does not require an appraisal or income verification
  • As long as veteran homeowners have been timely on their VA mortgage payment the past 12 months,  the borrower’s credit scores do not matter
  • They can have recent late payments and collections and still qualify for the VA Interest Rate Reduction Loans
  • Needs to be timely on their mortgage loan payment for the past 12 months
  • As with the FHA streamline refinance mortgage loan, VA Interest Rate Reduction Refinancing Loan is for rate and term only
  • Does not apply for VA cash-out refinance mortgage loans

Home Affordable Refinance Program ( HARP )

The Home Affordable Refinance Program, also referred to as HARP, is Fannie Mae’s and Freddie Mac’s equivalent to VA Streamline Refinance mortgage and FHA Streamline Refinance mortgage but for conventional loans.

  • The Home Affordable Refinance Program is not an indefinite mortgage refinance program
  • The FHFA (Federal Housing Financing Agency) has extended HARP program until December 2018
  • HARP was created by the government to assist homeowners who have underwater conventional mortgages due to the 2008 real estate collapse
  • To qualify for the Home Affordable Refinance Program, homeowners need to have conventional loans that are owned and backed by either Fannie Mae and/or Freddie Mac prior to June of 2009
  • No appraisal is required for HARP loans
  • Mortgage loan balance can be higher than the actual value of the property
  • No late payments are allowed for the past 12 months in order to qualify for a HARP loan

USDA Streamline Refinance Mortgage Program

Those homeowners who currently have a USDA mortgage loan can refinance their USDA loan with the USDA streamline refinance mortgage loan.  USDA Streamline refinance loans, like VA Streamline refinance loans and FHA Streamline refinance loans, do not require income verification nor credit checks.  No appraisal is required and bad credit is okay as long as the USDA homeowner has been timely on their current USDA mortgage loan for the past 12 months.  Only rate and term USDA refinance loans are permitted and cash-out refinance is not allowed.

Related> Beginners guide to refinancing your mortgage

Related> Consumer guide to refinancing

Related> When to refinance your mortgage

Related> Refinance: Mortgage refinance rates

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