If you are a current Federal Housing Association (FHA) borrower and interested in refinancing, now may be the perfect time to do it with a streamlined refinance. A streamlined refinance removes a considerable deal of time and work from the refinance process, and could potentially save you a small fortune during this time of historically low interest rates.
The Department of Housing and Urban Development has changed the rules under which FHA loan servicers can extend new loans, loan modification and refinance offers. In the past, HUD made it a point to assist borrowers with less than perfect credit by evaluating them holistically. The terms and conditions have changed, and credit scores will now be counted if you are looking to refinance.
Credit scores more important when applying for FHA loan or refinance
HUD has directed the FHA to apply the following rule changes when approving a new loan:
- Borrowers with a credit score of 580 or above are eligible for up to 97.5% of loan-to-cost financing. The borrower must put down 2.5%.
- Borrowers with a credit score that falls between 500-579 are eligible for 90% of loan-to-cost financing. The borrower must put down 10%.
- Borrowers with credit below 500 will not qualify for a government-backed, FHA loan.
- Borrowers utilizing the 203(h) “Mortgage for disaster victims” track are eligible for up to 100% loan-to-cost financing.
Refinancing an FHA loan right now through their streamlined process cuts significant refinancing costs. Consult with your FHA-backed lender soon, as you could potentially save thousands with these new rules.