The recession of the past several years has left many borrowers in deep water with various credit agencies. With many Americans losing their jobs or having a reduction in pay – the ability to make on time payments has decreased. Late payments on credit cards, auto loans, and medical bills hurt your credit score. Additionally consumers that have high balances on credit cards will often see their credit score decline. This can make refinancing a home difficult for many borrowers.
Mortgage interest rates are typically directly tied to a borrowers credit score. Some lenders will not even issue mortgage loans to people with bad or mediocre credit. This has left many borrowers in a lurch as they look to save money by decreasing their monthly bills. Fortunately the FHA Streamline Refinance program does not have a credit score requirement. Borrowers have the ability to refinance, even with lower credit scores. This is fantastic news for people that need to lower the interest rate on their home loan but are concerned they wont qualify by having poor credit.
FHA Streamline Refinance Qualifications
Existing FHA Loan – The streamline program is only for people that have an existing FHA mortgage. Since the FHA is already insuring the existing loan the organization can be confident in a borrowers pay history and the potential risk associated with the loan.
Good Standing – The mortgage loan must be current and paid on time. You could not have been late more than once in the previous 12 months.
Owner Occupied – This program is designed for peoples primary residence.
One to Four Units – This loan is not for apartment complexes but for single family homes.
By refinancing home owners can take the money they save, from lowering their interest rate, and apply it to existing debt in order to improve their credit score. The FHA Streamline Refinance program is smart in that they understand lowering a home owners monthly payment will give them a better chance of success. The less money people spend on a mortgage payment the more likely they are to afford it and their other bills. With this in mind the guidelines are more relaxed that traditional loan programs. From the lenders perspective if a borrower is making on time payments with a 6% interest rate, they will certainly be able to do so at a 4% interest rate – even with bad credit.
In order to obtain an FHA refinancing a home owner needs to work with an FHA approved lender. Not every mortgage banker is approved with the FHA. They have strict guidelines for who can issue these loans so typically only seasoned mortgage lenders will become approved. Interest rates are at historic lows right now. Borrowers can get fixed rate mortgages for as low as 3.5%. Borrowers that obtained their FHA loan over three years ago can expect to see a significant savings on their monthly bill.
By Nicole Davidson