FHA Loan Articles
News, updates, and explanations to keep you informed.
FHA Streamline Refinancing Rules for Adding/Removing Borrowers
In situations where a borrower wishes to refinance an FHA mortgage with FHA streamline refinancing, there may be a need to add or remove another borrower.
If a borrower is getting a divorce, for example, refinancing the property under a single person's name (removing the spouse) would make sense. The reverse is true for a single borrower who is refinancing and getting married-he or she might want to add the spouse to the title.
It's an important question--does the FHA allow the existing borrower to add or remove another person to the title in conjunction with an FHA streamline loan?
FHA rules do allow a borrower to add another name to the title in such cases. "Individuals may be added to the title on a streamline refinance without a credit worthiness review, and triggering the due-on-sale clause."
Why is it so easy to add another borrower in these cases? FHA streamline refinancing loans feature no cash back to the borrower. Since they are intended to lower interest rates and/or monthly payments, there is no credit check required. The applicant is not trying to borrow money against any additional equity in the home, so the process is much simpler to get the loan approved and a new name added to the title.
On the other hand. trying to remove a borrower from the title is more complicated, but possible. FHA rules state, "Individuals may be deleted from the title on a streamline refinance only under the circumstances described in Handbook 4155.1, 6.C.2.d:
a) When an assumption of a mortgage not containing a due-on-sale clause occurred more than six months previously and the assumptor can document that he or she has made the mortgage payments during this interim period;
b) Following an assumption of a mortgage in which the transferability restriction (due-on-sale clause) was not triggered, such as in a property transfer resulting from a divorce decree or by devise or descent, and the assumption or quit-claim of interest occurred more than six months previously and the remaining owner-occupant can demonstrate that he or she has made the mortgage payments during this time."
When removing a borrower from the title during a streamline loan, the rules put the burden of proof on the FHA borrower that he or she is financially able to handle the obligations of the loan-and has managed that financial burden successfully before the removal of other name(s) on the title.
FHA borrowers planning to remove someone from the title during streamline refinancing need to prepare documentation of their payments on the loan-canceled checks and other paperwork will come in handy as proof that the borrower is making the payments on his or her own.
FHA NEWS and RELATED ARTICLES
When applying for an FHA home loan, some lenders may ask for tax paperwork as part of the application process. Some borrowers may wonder if this is legal, or an acceptable practice for home loans in general.
There are many questions about the official FHA loan rules for occupancy for single-family home loans. According to FHA rules, a borrower must occupy the home purchased with a single-family FHA loan as a personal residence as a condition of loan approval.
After the housing market crisis of the previous decade, many mortgage borrowers found themselves having trouble making their monthly payments. In some cases, borrowers just walked away from the mortgage completely and allowed the home to be foreclosed upo
The FHA has announced it would accept electronic signatures (also known as e-signatures) on several FHA home loan documents. The new policies are found in detail described in FHA Mortgagee Letter 14-03.
Some of your FHA loan closing costs may be financed, and some may--after being negotiated between buyer and seller--be paid by the seller within the boundaries of the FHA loan programís rules. The borrower can also pay some closing costs out of pocket.