An FHA Streamline refinance can drop your rate and payment with no appraisal, income, or credit check. But it can also help you remove someone from the loan.
Here’s how to take someone off the mortgage using this program.
2 FHA Streamline options: Low-doc refinance vs Full re-approval
When you refinance with the FHA Streamline option (FHA-to-FHA refinance), you have two choices. These are important when deciding how you’ll remove the borrower.
- Low doc: this is called a “non-credit qualifying” refinance and does not require income documentation, a credit check, or an appraisal.
- Full re-approval: This is called “credit qualifying” and requires you to be re-approved for the loan using your current income documentation and credit report. No appraisal is required.
If possible, you want to use the low doc non-credit qualifying version. This will save you time and money.
Check out all guidelines for this program here: FHA Streamline Waiting Period, MIP Refunds, + Guidelines
Removing a borrower using the low-doc option (non-credit qualifying)
There are 3 instances when you can remove a borrower without re-qualifying for the loan.
- Legal separation
- Death of a borrower
You will supply the divorce decree or separation agreement showing the property was awarded to the one staying on the loan. In the case of death, FHA does not require documentation such as a death certificate, but lenders may ask for it anyway.
In addition, you have to supply bank statements or other proof that the remaining borrower has made six on-time payments alone without the help of the departing borrower.
Removing a borrower using full re-approval (credit qualifying)
If you can’t meet the above requirements, you can opt for a “credit qualifying” FHA Streamline. This is just like a regular refinance, except no appraisal is required.
At least one original borrower must stay on the loan.
You will submit pay stubs, W2s, and other income documentation. The lender will pull your credit.
The lender must make sure that you qualify for the FHA refinance using only your income, assets, and credit profile.
This can pose a problem if the departing borrower earns most of the income. The remaining party may not make enough to re-qualify. In this case, it may not be possible to remove the borrower.
Options if you don’t qualify
Here are things you can do if you don’t meet any of the requirements to remove the borrower.
- In the case of divorce, legal separation, or death of a borrower, make six on-time mortgage payments. Then apply for a non-credit qualifying FHA Streamline.
- If you need full re-qualification, wait until you have enough income. Then apply for the refinance. The full payment plus all debt payments should be under 57% of your gross income.
- If the remaining borrower has insufficient income showing on tax returns, try a bank statement loan. This will require 12 to 24 months of bank statements. This is not an FHA loan but an alternative loan options offered by many banks.
- Sell the home
While some of the above options are not ideal, they may help to eventually remove the borrower.
Adding someone to title or the mortgage
You can add a borrower to the title and/or mortgage using an FHA Streamline refinance very easily.
There are no restrictions on who can be added to the loan. Also, re-qualification is not required for the existing or new borrower.
Simply add the individual to the loan application. Their credit, income, or assets need not be reviewed or approved.
Start your FHA Streamline
If you’re looking to remove a borrower from your loan, an FHA Streamline refinance can be a great way to do it.
With no appraisal, income documentation, or credit report required, this option saves you time and money compared to a traditional refinance.