While most existing borrowers relish the idea of FHA refinancing without credit qualifying, there are occasions when credit and full documentation is necessary. The FHA streamline refinances with credit qualifying are similar to those without, but are used when certain conditions are present.

Payment of closing costs is a common reason for using a credit qualifying FHA refinance. When borrowers wish to roll the closing costs/prepaids into the new loan amount, credit qualifying with a new appraised value is necessary. With the FHA streamline no cash out, the closing costs/prepaids are either paid by the borrowers at closing or paid through a lender premium.

While there are several other occasions that will trigger an FHA credit qualifying refinance, the second most common reason is when a change in the term of the mortgage increases the mortgage payment by more than 20%. This often occurs when borrowers move from a 30 year mortgage to a 15 year mortgage and when moving from an adjustable mortgage rate to a fixed rate and term.

Documentation for a credit qualifying streamline refinance is similar to a regular FHA mortgage. Full documentation is required which means pay stubs for the most recent 30 days, two years W2s, 2 years of income tax returns for borrowers who are self employed, 2 recent months of bank statements (or Verification of Deposit and bank statement for one month). A credit report is pulled and all debt will be calculated, as well as, debt to income ratios. In reality, this type of refinance requires regular underwriting procedures.

With this in mind, there is no doubt that the FHA streamline refinance with no cash out is the more popular product since it is simple and fast. When the FHA streamline refinance with credit qualifying is necessary, borrowers should be prepared to follow all ordinary mortgage procedures, including the amount of time it takes for processing, underwriting and closing. To find out more about the FHA streamline refinance, simply complete the online form and receive a response in minutes.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.