July 28, 2014
In our last blog post we examined FHA loan rules for skipped payments and delinquent mortgages with regard to an FHA refinance loan. HUD 4155.1 Chapter Three addresses these issues in general, stating the FHA requirement that, “The borrower must be current on the loan being refinanced for the month due prior to the month in which he/she closes the refinancing, and for the month in which he/she closes.”
But what does the FHA loan rulebook specifically say about delinquent payments on mortgages to be refinanced with an FHA Streamline Refinance loan? HUD 4155.1 Chapter Six Section C states, “A delinquent mortgage is not eligible for streamline refinancing until the loan is brought current.”
That means that skipped payments are not allowed, and the delinquency issue must be addressed as a condition of loan approval.
There’s also a “seasoning requirement” for FHA Streamline Refinancing. In addition to being current on the mortgage, HUD 4155.1 Chapter Six Section C also requires the loan to be at least six months old prior to the refinance loan application. Specifically, the loan must be six months old or more when the FHA case number has been assigned:
“On the date of FHA case number assignment,
• the borrower must have made at least six payments on the FHA-insured mortgage being refinanced
• at least six full months must have passed since the first payment due date of the refinanced mortgage, and
• at least 210 days must have passed from the closing date of the mortgage being refinanced.”
Borrowers should keep both the skipped payments rule and the seasoning period rule in mind when planning an FHA Streamline Refinance loan–especially those who purchased homes with adjustable rate mortgages and who are approaching the end of the introductory rate period. If you are trying to refinance to avoid getting a higher rate once that period ends, don’t forget to factor in the FHA Streamline Loan seasoning period into your plans.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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