FHA Rules For Streamline Refinancing With or Without a Credit Check

FHA Streamline Refinancing loans–which are issued for those with existing FHA mortgages–are available in two ways.

One is a non-credit qualifying streamline loan which is available to qualified borrowers, the other is the “with credit check” or “credit qualifying” streamline refinance. When is a borrower eligible for a no-credit check FHA streamline loan?

Part of the answer requires a look at the FHA definition of the streamline loan. According to the FHA official site, “Streamline refinances are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage, and must involve no cash back to the borrower, except for minor adjustments at closing that are not to exceed $500.”

The FHA permits streamline refinancing loans with no credit check with the borrower has owned the property for at least six months. Specifically, HUD 4155.1 Chapter 6 Section C states:

“..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.”

In situations including (but not limited to) refinancing loans where the principal or interest rates actually increase rather than decrease, the FHA rules do allow the loan to proceed, but the borrower must submit to a credit check.

“A credit qualifying streamline refinance must be considered

  • 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.”

FHA loan rules further clarify the rules for credit-qualifying streamline refinancing loans–according to the FHA official site,  “The use of a credit qualifying streamline refinance for situations in which the change in mortgage term will result in an increase in the mortgage payment is only permissible for owner-occupied principal residences, secondary residences meeting the requirements of HUD 4155.1 4.B.3, and investment properties owned by governmental agencies and eligible nonprofit organizations as described in HUD 4155.1 4.A.6.”