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FHA Changing Streamline Refinance Guidelines

by Karen Lawson
September 24th, 2009

FHA offers a simplified refinance program for homeowners wishing to refinance their existing FHA mortgages. This refinance program provides easy qualifying requirements, and quick closing, but changing FHA guidlines reflect tighter credit requirements across the mortgage lending industry.For all streamline refinance transactions with FHA case numbers issued on or after November 17, 2009  changes in FHA’s streamline refinance program include:

At the time of application, borrowers must demonstrate a satisfactory payment history:Applicants for streamline refinancing must have made at least six payments on the mortgage being refinanced. For mortgage loans less than 12 months old, all payments must have been made within 30 days of their due dates. For mortgage loans greater than 12 months old, borrowers must have no more than one payment more than 30 days late, and must have made the immediately preceding three payments on time.

Tangible net benefit to borrowers: The new mortgage under the streamline refinance program must provide a “tangible net benefit” to the homeowners. FHA defines “tangible net benefit” as:

  • Reduction in the total mortgage payment (principle, interest, taxes and insurance, HOA dues, etc ) by five percent or more. If your total payment for your existing mortgage is $1200, your streamline refinance must have a total monthly payment of $1140 or less.
  • Refinancing from an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM)
  • Reducing the repayment term of the mortgage; converting from a 30 year FRM to a 15 year FRM isa typical example. Cash-out refinancing is not permitted when refinancing to a shorter repayment term.

Verification of income and assets: Mortgage lenders must verify employment, income, and the source of assets needed to close your streamline refinance.

Credit scores: All borrower credit scores are required.

Maximum Loan-to-Value (LTV): Fore refinance mortgages with subordinate financing remaining in place, the maximum combined LTV is 125 percent. The original appraised value of the home will be used for determining LTV in streamline refinances where no appraisal is required.

These are highlights of changes in the streamline refinance program,; FHA mortage lenders can provide full details. Shopping online for FHA approved mortgage lenders can help you find streamline refinancing terms matching your needs, and these lenders can also provide additional information about the FHA streamline refinance program and FHA guidelines in general. Knowing what to expect when applying for your streamline refinance can help you get approved and complete your refinance faster.

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