December 20, 2011
Borrowers who take out FHA insured mortgages are eligible to apply for FHA Streamline Refinancing loans, which features reduced paperwork and underwriting requirements in many cases compared to other refinancing options including cash-out refinancing loans and similar transactions.
There are plenty of reasons why now might be a good time for some borrowers to consider refinancing an FHA guaranteed mortgage–Streamline Refinancing features a lower monthly mortgage payment, lower interest rates, or both with certain exceptions. For example, if a borrower is refinancing from an adjustable rate mortgage to an FHA fixed-rate loan, the interest rate on the refinanced loan may be higher than the variable rate.
These features sound good to many FHA borrowers, but how soon after purchasing a home with an FHA mortgage can a home owner begin thinking about refinancing?
According to new FHA guidelines issued on February 14, 2011, there are new requirements–a timetable that establishes how soon after purchasing a home the borrower can be considered for an FHA Streamline loan. According to the new rules borrowers must wait a minimum amount of time (known as a “seasoning period”) and make a minimum number of payments before an FHA Streamline Loan can be considered.
FHA Mortgagee Letter 2011-11 states, “On the date of FHA case number assignment…The mortgagor must have made at least six payments on the FHA-insured mortgage that is being refinanced…” This waiting period is important as some FHA home loans (new construction loans, for example) may not require a mortgage payment right away, though the loan is considered to be approved and closed.
FHA rules also add a six-month requirement on top of the six payment rule. “At least six full months must have passed since the first payment due date of the refinanced mortgage, and…at least 210 days have passed from the closing date of the mortgage being refinanced.”
The FHA rules don’t just dictate whether an FHA Streamline Refinancing Loan can be approved in these cases, they also dictate when the borrower is allowed to file an application for a streamline loan. “For example, if the FHA case number on the mortgage being refinanced was closed on or before December 1, and if mortgagor
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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