September 9, 2021
Do you have an FHA adjustable-rate mortgage, also known as an FHA ARM loan? Is your introductory rate about to expire? It may be a very good idea to explore your refinance options to avoid the higher interest rate.
Borrowers with adjustable-rate home loans rightfully get a bit nervous when the end of their introductory interest rate period, also known as a “teaser rate” period is about to and the first adjustment to the ARM loan’s interest rate becomes due.
Borrowers can negotiate an introductory rate that lasts as little as one year and as many as 10 years with the lender, but eventually, that initial rate will end and the first adjustment will come due.
If you have an FHA ARM loan you may be eligible for either a credit-qualifying Streamline Refinance loan or a non-credit qualifying FHA Streamline refi. In many instances FHA streamline loans are available to the borrower without the FHA credit check, and in other situations, the credit check may be needed. In either case, FHA loan rules will apply.
Non-Credit Qualifying FHA Streamline Refinance Loans
HUD 4000.1 instructs the lender, “The Borrower must have made all Mortgage Payments for all Mortgages on the subject Property within the month due for the six months prior to case number assignment and have no more than one 30-Day late payment for the previous six months for all Mortgages on the subject Property.”
Furthermore, the Borrower is required to make the payments for “all Mortgages secured by the subject Property within the month due for the month prior to mortgage Disbursement. “
Credit-Qualifying FHA Streamline Refinance Loans
FHA loan rules in HUD 4000.1 state, “For all mortgages on all properties with less than six months of Mortgage Payment history, the Borrower must have made all payments within the month due.
For all mortgages on all properties with greater than six months of Mortgage Payment history, the Borrower must have made all Mortgage Payments within the month due for the six months prior to case number assignment and have no more than one 30-Day late payment for the previous six months.”
Furthermore, the borrower must have made the payments “for all Mortgages secured by the subject Property within the month due for the month prior to mortgage Disbursement.”
Ask a loan officer how an FHA Streamline Refinance can help in cases where the borrower needs to avoid the new interest rate adjustment or refinance into a fixed rate mortgage soon after. You’ll be glad you did, even if you decide to wait to refinance the loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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