Frequently Asked Question: Can I do an FHA streamline refinance without an appraisal to remove a non-occupying co-borrower?

Q: I purchased a home in 2008 with a non-occupant co-borrower because I didn't qualify to buy a home on my own. Now, the non-occupying co-borrower wants to purchase own home. I have an FHA mortgage. Can I do a streamline refinance without an appraisal to remove non-occupant co-borrower? The house is underwater (I owe more on the mortgage than the house is worth, and I want to avoid an appraisal). I can qualify for a mortgage now on my own as my credit has improved drastically, and I can verify I've made the payments on my own for the last 16 months.

A: Yes, you can do an FHA streamline refinance without an appraisal.

FHA specifically states in their FHA Handbook 4155.1 and 4155.2 that "credit-qualifying" streamline refinances contain all the normal features of a streamline refinance, but provide a level of assurance of continued performance on the mortgage."

In a FHA streamline refinance where one (or more) of the co-borrowers will be removed, the remaining borrower(s) must document that they have an acceptable credit history and the ability to make payments. Alternatively, you can show that you have made the mortgage payments on time your own over at least the previous 6 months provided the FHA mortgage does not contain a due-on-sale clause. This is an FHA "credit-qualifying" streamline refinance, and you don't need an appraisal.