How Long After Forbearance Can You Refinance an FHA Loan?

Mortgage forbearance provided a temporary pause or reduction in monthly loan payments for many homeowners facing financial hardship. For those with Federal Housing Administration (FHA) loans, understanding the path to refinancing after such a period is important. This guidance outlines the eligibility criteria and steps involved in refinancing an FHA loan once forbearance has concluded.

FHA Refinance Eligibility After Forbearance

Refinancing an FHA loan after a period of mortgage forbearance is possible, with eligibility resting on consistent payments following the forbearance period. The specific waiting period depends on the type of refinance sought and how the forbearance was resolved. For a standard rate-and-term refinance, borrowers need to make at least three consecutive monthly payments after successfully completing their forbearance plan. If a borrower repaid all missed payments in a lump sum before the forbearance ended, they might not face a waiting period.

For those considering a cash-out refinance with an FHA loan, a longer payment history is required after exiting forbearance. Borrowers must complete the forbearance plan and then make at least 12 consecutive monthly payments to qualify. The FHA also offers Streamline Refinance options, which can have different post-forbearance requirements. A non-credit qualifying FHA Streamline Refinance requires at least three consecutive monthly payments since the completion of the forbearance plan. For a credit-qualifying FHA Streamline Refinance, borrowers may be eligible even with fewer than three post-forbearance payments if they maintained a strong payment history for six months prior to entering forbearance, with no more than one 30-day late payment in that period.

The resolution of the forbearance also affects the timeline for refinancing. If the FHA-insured mortgage was modified after forbearance, the borrower must have made at least six payments under that modification to be eligible for a Streamline Refinance. For other types of FHA loans after a modification, a 12-month waiting period of timely payments is required before a new FHA loan can be considered. These are FHA guidelines, and individual lenders may have additional requirements, known as overlays.

Preparing for Your FHA Refinance Application

Before applying for an FHA refinance, borrowers should gather documentation to demonstrate their ability to meet mortgage obligations. This includes collecting proof of income, such as recent pay stubs and W-2 forms, or tax returns if self-employed, to show consistent earnings. Statements from bank accounts and other asset holdings are also needed to verify financial reserves.

An important step for those who were in forbearance is to obtain official documentation confirming the successful completion of their forbearance agreement. This can be a letter from the mortgage servicer or a detailed payment history showing adherence to any post-forbearance repayment plan or loan modification terms. Reviewing one’s credit report is also important to ensure accuracy and understand how the forbearance period is reflected. While a properly managed forbearance should not negatively impact a credit score, any missed payments before or after the agreement can. Addressing inaccuracies on the credit report and focusing on consistent on-time payments for all financial obligations can help strengthen one’s credit profile before applying.

Submitting Your FHA Refinance Application

Once preparatory steps are complete and eligibility is confirmed, submit your FHA refinance application to an approved lender. The process begins by selecting an FHA-approved lender that offers the specific refinance program you qualify for. After providing documentation, including income verification, asset statements, and proof of your post-forbearance payment history, the lender will guide you through the application forms.

Following the initial application, the lender will process your request. This may include an appraisal of the property, though some FHA Streamline Refinance options may not require a new appraisal. The loan then moves into the underwriting phase, where the lender assesses your financial health, creditworthiness, and the property’s eligibility against FHA and their internal guidelines. If approved, the final step is the loan closing, where all necessary documents are signed, and closing costs, which range from 2% to 6% of the loan value, are paid. Throughout this process, maintaining open communication with your lender can help ensure a smoother experience.