Credit History Not Necessary With the FHA Streamline Refinance Program

Standard

Many homeowners have been left with high mortgage bills and questionable credit after the financial crisis that occurred several years ago. Reduced employment and no employment are issues that would make a refinance difficult or nearly impossible in today’s market. Some have incurred additional debt in order to survive. Under normal circumstances, refinancing to lower mortgage rates would be out of the questions. However, for FHA mortgage holders, a credit history is not necessary with the FHA streamline refinance program.

In the past, many homeowners used the FHA mortgage program to purchase their homes. FHA offers many different loan products and benefits which make them especially appealing to first time home buyers. For these homeowners, the FHA streamline program is a life raft to a better loan.

The FHA streamline is a fast and easy refinance as long as any equity available is not taken out as cash. In fact, homeowners using the streamline program do not even need to have any equity; underwater homeowners are also eligible for the program because it does not require an appraisal since home value is not significant.

For many homeowners, credit history and credit scores are an issue when obtaining a mortgage refinance. This is not the case with the FHA streamline. This program does not have a credit history or credit score requirement. A homeowner’s credit is based on the existing mortgage payment history.

Further, guidelines for the streamline do not require an employment or income verification. However, some lenders may require it while others may not. In most cases, even homeowners who have lost their jobs can be approved for the FHA streamline.

Qualifying for the streamline is as follows:

  • The loan must be an existing FHA loan that is insured by the Federal Housing Administration.
  • The home must be owner occupied as the primary residence. It can be a single family to four family unit.
  • The existing loan must show current and on-time payments. The homeowners cannot have more than one late payment in the most recent 12 months.
  • There must be a “net tangible benefit” which means that a savings must occur with the new mortgage.

Homeowners must use an FHA approved lender in order to obtain a refinance through this program. Not all lenders are FHA approved. Since mortgage rates are significantly lower today than in the past, homeowners can expect to see a substantial amount of savings when using this refinance program to move to a better mortgage.