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It can be easy to get confused over the difference between lender requirements and FHA refinance loan standards--did you know that FHA loan rules for Streamline Refinancing permit the lender to require things the FHA rules don’t insist upon?

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FHA Streamline Refinancing: Appraisal Required?

July 7, 2015 - It can be easy to get confused over the difference between lender requirements and FHA refinance loan standards--did you know that FHA loan rules for Streamline Refinancing permit the lender to require things the FHA rules don’t insist upon? Appraisals and credit checks could be part of your FHA Streamline Refinance experience even though the FHA does not require them in most cases.

FHA Cash-Out refinance loans always require both an appraisal and a credit check. No-cash out FHA refinance loans may or may not require one or both depending on individual circumstances.

While these loans are available for both FHA and non-FHA loans, FHA Streamline Refinance Loans are intended for borrowers with existing FHA mortgages. These refinance loans are permitted on any type of existing FHA loan–fixed rate, adjustable rate, graduated payment mortgage, etc.

FHA Streamline borrowers will ask whether there is a new credit check or appraisal required; there is no short answer to this because while FHA loan rules do not demand a new appraisal, the lender may require one anyway.

Credit check issues also depend on circumstances--the type of refinance transaction (fixed rate to adjustable rate, for example) and how long the borrower has owned the property could all factor in.

FHA loan rules explain some of the circumstances under which a credit-qualifying streamline refinance would be required. A credit qualifying streamline refinance must be considered, says the FHA official site:
  • when a change in the mortgage term will result in an increase in the mortgage payment of more than 20%
  • when deletion of a borrower or borrowers will trigger the due-on-sale clause
  • following the assumption of a mortgage that occurred less than six months previously, and does not contain restrictions (i.e. due-on-sale clause) limiting assumption only to a creditworthy borrower, or
  • following the assumption of a mortgage that occurred less than six months previously, and did not trigger the transferability restriction (that is, the due-on-sale clause), such as in a property transfer resulting from a divorce decree or by devise or descent.

Lenders are free to require a new appraisal and/or credit check where that financial institution’s standards require it.

Aside from the credit check and appraisal issues, FHA loan requirements for Streamline Refinancing include the following:

“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”.
Talk to your loan officer about your needs for an FHA Streamline Refinance loan and know your options well before you start filling out paperwork--you’ll be glad you did.