April 4, 2013
A reader asks, “I am trying to refinance my FHA loan with my current lender. I was refused they said, because my credit score is too low. I thought this did not matter? I thought the FHA STREAMLINE was intended for situations like ours.”
“I have never been late or missed a payment in 4.5 years. My husband is doing well now and we are trying to get back to normal. Does the credit score count against you or not on the FHA streamline? And do the banks have a right to refuse the streamline if you are eligible?”
There are several factors that must be considered when looking at a question like this. It’s true that FHA Streamline loans have no FHA requirement for credit underwriting which would include a credit check. But it is also true that FHA rules do not prevent a lender from requiring a new credit check or even a new appraisal. Credit scores and and would be a factor in such cases.
The basic idea is that FHA loans are issued by participating lenders. The FHA cannot force a lender to issue any kind of FHA guaranteed loan–the lender’s credit standards would apply in any case.
The best thing for this borrower to do is to look for a new lender that would be willing to issue an FHA Streamline loan in her circumstances. There is no guarantee that a borrower can get an FHA loan–it’s up to the borrower and lender to negotiate. But shopping around for a lender is definitely a good idea, especially when your current financial institution is less than willing to help.
Borrowers should not make the mistake of assuming that a refinance loan–FHA Streamline or not–is limited only to the bank or financial institution that issued the original mortgage. You can apply for an FHA refinance with ANY participating lender. It’s as easy as getting pre-qualified online or in person.
Do you have questions about FHA mortgages or refinance loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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