FHA Streamline Refinances Available for Those Whose Credit Has Gone Bad

By Gina Pogol
Mortgage Credit Problems Columnist

Mary Asks: I'd like to refinance my FHA mortgage. But my home value has dropped and my credit is kind of bad too. Is there any chance of refinancing my home loan?

Gina Says: Sure. The FHA Streamline Refinance is available only to homeowners with FHA mortgages. If you're an FHA homeowner today and are looking for bad credit mortgage refinance, there are several reasons why the FHA Streamline refinance program is a better deal for you than the traditional Fannie or Freddie mortgage refinance.

1. FHA won't beat you up even if you did something stupid. Your credit may have dropped, but as long as you have paid your mortgage, you still get your refinance.
2. It's great for people stuck in crumby housing markets: FHA doesn't require an appraisal of your home and if you are underwater it doesn't matter.
3. It saves money: If you've had your loan less than 5 years, the FHA refunds a portion of your original closing costs directly to your bottom-line
4. You won't have to prove your income for a refinance- no paystubs, no W-2 statements, tax returns, hair and saliva samples…just be able to prove that you still have your job.

It makes sense--homeowners making payments at a higher mortgage rate should logically be able to make payments at a lower mortgage rate. The FHA is more concerned about helping FHA homeowners improve their financial positions because it knows lower housing payments make default less likely in the long-run.

Approval Isn't a Complete No-Brainer. You Have to Meet Some Requirements.

1. Homeowners must be current on their mortgage payments. No late payments (30 days or more) in the last 12 months.
2. Homeowners must have at least 6 months of history paying on their current mortgage.
3. The new loan size can't exceed the original size of the FHA loan being replaced--no cash out, and you need to bring in your closing costs.
4. In addition, some lenders have chosen to impose minimum credit score requirements.

And Then there Are Closing Costs.

You can bring them in or your lender can take your rate up slightly and absorb the costs itself. And some of the original Mortgage Insurance Premium that you paid when you got your first FHA loan may be refundable.

A good loan agent can walk you through your options and help you decide if a refinance makes sense and how to handle your closing costs. Find a mortgage agent you trust, run your numbers through handy online mortgage calculators, and make a money-saving decision.

About the Author
Gina Pogol has over a decade of mortgage lending experience, in addition to practice as a paralegal for a bankruptcy attorney, and as a business credit consultant for Experian. She is also certified to underwrite Fannie Mae loans. She earned her BS in Financial Management from the University of Nevada.

All information provided “as is” for informational purposes only, and is not financial advice. MortgageCreditProblems.com, its affiliates, and any of the independent providers of information on this site shall have no liability for any informational errors or incompleteness, or for any actions taken in reliance on information contained herein.

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