In the last few months, only a select few lenders have not required a minimum of a 620 credit score on all California FHA streamline refinances. Yesterday, the last major lender who used to not require a minimum credit score has announced that they now require a 620 credit score for all California FHA streamline refinance loans. Taylor, Bean and Whittaker announced that they would now be requiring at least a 620 minimum credit score on all California FHA streamline mortgage refinance loans.

New Minimum Credit Score Announcement Details

FHA Streamlines (credit and non-credit qualifying) and VA IRRRL’s with Credit Scores below 620 must be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered to TBW within 10 days after closing Loans in this category locked on and after July 13, 2009 will require a minimum FICO of 620. Clients will be required to obtain a 3 Repository credit report and utilize the standard method of determining qualifying FICO.

Any Conventional, FHA (including Streamline Refinance), or VA (including IRRRL) loan that exceeds $417,000 with a Credit Scores below 660 must be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered to TBW within 10 days after closing Loans in this category locked on and after July 13, 2009 will require a minimum FICO of 660. Clients will be required to obtain a 3 Repository credit report and utilize the standard method of determining qualifying FICO.

In addition, any previously announced minimum Credit Score requirements that TB&W has put into place, that did not have a specified Closing date, will be required to be LOCKED prior to July 13, 2009 AND must CLOSE (Note Date) no later than September 15, 2009, and must be delivered within 10 days after closing. Therefore, any loan, regardless of whether it may be locked, registered or approved, that has a qualifying credit score below 620 (with the exception of those loans that have specified higher FICO requirements) must CLOSE (Note Date) no later than September 15, 2009.

TB&W will continue to allow non-traditional credit for those borrowers with no useable credit for the loan programs that allow the use of such credit in accordance with published guidelines. TB&W is fully aware that these limitations may result in the inability for a particular loan to meet these specified deadlines. TB&W will work as diligently as possible to accommodate all loans in the pipeline. We will be unable to grant any extensions or exceptions to these requirements.

California FHA Streamline Refinance: What Does This Mean?

Although the FHA guidelines do not officially require a minimum credit score, virtually all lenders (and all of the major lenders) in the US are now requiring a minimum of a 620 credit score. TB&W was the last major US lender who was not requiring that you had at least a 620 minimum credit score. It is possible that there are still smaller lenders who can offer the California FHA refinance streamline loan with no minimum credit score requirement, but it might be difficult to find them.

But wait – Is that all there is to the California FHA streamline program? Not anymore. many lenders are making it harder for people to participate in the FHA streamline refinance program because they are now requiring a minimum credit score of 620. Many lenders are requiring this, but not all lenders are requiring that you have a minimum credit score.

The truth is, FHA doesn’t have a minimum credit score requirement — it is the lenders who actually are lending you the money that do.  About a year ago, lenders started requiring a minimum of a 580 credit score and as early as January of this year, some lenders started requiring a 620 credit score. Now a 620 minimum credit score has become the norm for lenders to require.

Do all FHA lenders require that you have a minimum credit score in order to get approved for a California FHA streamline? No, but many of them are.  You can still get approved for a FHA streamline refinance no matter how bad your credit score is as long as you have made your payments on time for the last 12 months.

Why?

Because the interest rate that you will end up getting with your FHA streamline refinance is the one that is “locked in” when your loan officer actually locks your FHA streamline refinance with the investor.

You can check the California mortgage rates to get a good idea of what to expect to be initially quoted – here we have posted an average of what people are being quoted across the nation in real time. Remember, these are the averages of the quotes and you will want to speak with a loan officer about your particular file. Once you speak with your loan officer, be sure to be in constant contact with your loan officer once you start the paperwork for your California FHA streamline refinance until your loan is actually locked in with the investor.

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One last thing, nothing is final until you have signed the final paperwork for your California FHA streamline refinance – you can change lenders at any time. If you have questions during the FHA streamline refinance process, and your loan officer isn’t answering them – it might be a good idea to switch lenders!

When you participate in the FHA streamline program, you may defer a months payment if you choose to.

Doesn’t the word skip mean the same thing as defer?

Almost, but not quite.

Skipping a payment would mean that you simply don’t pay it. Deferring a payment means that you will pay it – but you will pay it later.

When you participate in the FHA streamline program, you can defer a month’s payment. That much is true. And with the economy the way it is, many people who are doing an FHA streamline are choosing to defer a payment. Do they have to? Are they required to according to FHA guidelines? Absolutely not. You are not required to defer a payment. But in all the years that I have been doing FHA streamlines, I have yet to meet someone who didn’t want to defer one month’s mortgage payment if they had the option to.

So there you have it. Skipping a payment when you participate in the FHA streamline program isn’t an option — although deferring a payment is.

A technical point, yes.

But a very important one.

Many people in California that are currently in an FHA loan have heard at least something about the California FHA streamline program and call us with their questions. One of the most popular questions that we receive about the program is:

“how much in closing costs should we expect when we go through the FHA streamline program?”

When people ask us this question, our general answer is:

“it depends.”

California FHA Streamline Closing Costs:

Anytime you have a transaction as large as your home, there are going to be costs involved — and FHA wants to be sure that any costs involved with the FHA streamline program don’t outweigh the benefits. With the FHA streamline refinance program, there are lender fees, title fees and possibly appraisal depending on if you are trying to do a streamline-with-appraisal program or not.

The sum total of these fees should be somewhere in the neighborhood of 2-3% of your loan amount.

California FHA Streamline Closing Costs: No Out Of Pocket Closing Costs

One of the nice things about the FHA streamline refinance program is that FHA will allow you to roll your closing costs into the loan and not make you “write a check” to cover them. When you choose to have the lowest rate available and “pay” the closing costs, you can roll those closing costs into the loan.

Whenever you roll the closing costs into the loan as part of the transaction, it is called a “no out of pocket closing costs” loan.

California FHA Streamline Closing Costs: No Closing Costs

A different option with the FHA streamline program is to have the lender pay your closing costs — which is different than you rolling your closing costs into the loan.

The lender will generally be happy to pay your closing costs for the FHA streamline program in exchange for a higher interest rate. If the lowest rate available is 5% on a given day, the lender may agree to pay your closing costs in exchange for you having a higher interest rate – for example it may be 5.5%.

Which is the better financial option for you:

• FHA Streamline With No Out Of Pocket Closing Costs
• FHA Streamline With No Closing Costs

It depends.

Make sure you speak with one of our mortgage experts about which option is right for you — every situation is different and it is important to work with a California FHA streamline expert!

Well, this is kind of true… and kind of not.

FHA is not actually requiring that homeowners who are in FHA loans and want to refinance with the streamline program have a 620 credit score, but many lenders are.  Note: not all lenders are requiring a 620 credit score.

What this means to you if you are currently shopping for an FHA streamline refinance is that you need to ask the question “are you requiring a credit score for the FHA streamline program?” and expect many lenders to say “yes”.

But some will say “no” — or at least as of today they will.

But this could change… at any time… and has recently. Lenders started requiring that borrowers had a minimum of a 580 credit score about a year ago, but recently, may of them have moved to 620. I haven’t head of any talk of it moving higher, but I can say that I wouldn’t expect it to go lower anytime soon.

Why is the FHA streamline so popular? Well, for starters, you don’t have to fully qualify for a new loan. You also get to skip one months payment when you go through the streamline program which will free up cash at a time when many people need cash. You probably won’t need an appraisal. And – perhaps the most important, FHA won’t let you participate in the program unless it actually lowers your interest rate and puts you in an overall better financial situation.

So — if you are in the market for a FHA streamline loan or if you are wondering if you can take advantage of lower interest rates, be sure to act quickly and find a lender who is not requiring a credit score. True, it is harder than it used to be to find a lender who can do a FHA streamline with no minimum credit score, but it can still be done. Call to speak with an FHA streamline expert who knows if the FHA streamline is still possible to do without requiring a minimum credit score or if using a credit repair service may be your best option.