Do you have to be current on your mortgage to refinance?
The short answer to your question is that you have to be current on your mortgage to be eligible for a refinance. Although guidelines vary by loan program, being current is typically defined as being no more than 45 days past the date of your most recent payment.
If you are currently delinquent on your mortgage, you need to correct the issue before your refinance can close. You are also required to pay off any past due interest and fees you owe.
Prior to the close of your refinance, the settlement or closing agent requests a demand payoff statement from your current lender. The demand payoff statement outlines the amount of money you owe the lender including your outstanding mortgage balance and any other past due items. You are required to pay off the figure listed on the demand payoff statement when your refinance closes.
In addition to being current on your mortgage, lenders also review your recent payment history to determine your ability to qualify for a refinance. As we outline below, the mortgage payment history requirements for a refinance vary by loan program.
Mortgage Payment History Required to Qualify for a Refinance
Conventional Refinance. This is the most common mortgage refinance program. Some conventional mortgage refinance programs permit a loan-to-value (LTV) ratio of up to 97%.
no late mortgage payments over the course of the past year
Enhanced Relief Refinance Program. This conventional refinance program does not require a credit score, appraisal report or income verification.
no missed mortgage payment within the past six months and no more than one 30 day late payment in the past twelve months
High LTV Refinance Option Program. Another conventional refinance program that does not require a credit score or apply a maximum LTV ratio.
no missed mortgage payment within the past six months and no more than one 30 day late payment in the past twelve months
The table below shows conventional refinance mortgage rates and closing costs. We recommend that you contact multiple lenders to learn more about program availability and terms.
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Standard FHA Refinance. This program is backed by the government and enables you to refinance with a low credit score and a maximum LTV ratio of up to 97.75%.
Required payment history over the past year:
no more than two 30 day late mortgage payments
no more than one 60 day late payment plus one 30 day late mortgage payment
no late mortgage payments of more than 90 days
FHA Streamline Refinance. The program enables you to refinance an existing FHA loan with a new FHA mortgage and does not apply a maximum LTV ratio.
no more than one late mortgage payment in the prior three months
Use this table to compare FHA refinance rates and fees for leading lenders in your area. FHA rates are usually lower than conventional rates but you are required to pay mortgage insurance which increases your upfront and monthly costs.
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Standard VA Refinance. This program is available to eligible active duty military personnel and veterans and permits a maximum LTV ratio of 100%.
a written explanation is required for applicants with more than one 30 day late mortgage payment over the past year
VA Streamline Refinance. Also called the VA Interest Rate Reduction Refinance Loan (IRRRL), this program does not require applicants to verify their income, employment or credit score when refinancing an existing VA mortgage with a new VA loan.
no more than one late mortgage payment over the past year
The VA mortgage program offers attractive terms for eligible borrowers including lower mortgage rates. We recommend that you shop multiple lenders to find the best VA refinance terms.
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Standard USDA Refinance. This program enables you to refinance the mortgage on a property located in a designated rural area and allows a maximum LTV ratio of 100%.
no late mortgage payments of more than 30 days over the past year
USDA Streamline Refinance. This program enables you to refinance an existing USDA home loan without requiring and appraisal report or credit report or applying a maximum debt-to-income ratio.
no late mortgage payments over the past year
Please note that for the standard FHA, VA and USDA loan programs, you may be able to qualify for a refinance if your mortgage payment history does not meet the guidelines outlined above but your mortgage application requires manual underwriting, which requires additional documentation from both you and the lender.
For example, you may be required to provide a letter of explanation that outlines why the late payment(s) occurred and your lender may need to provide a letter that explains why your application should be approved. You do not know if your refinance application is approved until the manual underwriting process is complete and there is no guarantee what the decision will be.
Please note that many lenders are not willing or capable of manually underwriting mortgages because of the uncertainty involved as well as the extra time and effort required. If your mortgage payment history does not satisfy the standard requirements make sure to select a lender who has worked with applicants with similar issues and who has extensive manual underwriting experience.
Sources
"B3-5.3-03, Previous Mortgage Payment History."  Selling Guide: Fannie Mae Single Family. Fannie Mae, July 25 2017. Web.
"II.A.4.b.iii.(K). Housing Obligations/Mortgage Payment History (TOTAL)." FHA Single Family Housing Policy Handbook 4000.1. Federal Housing Administration, January 2 2020. Web.
"Chapter 4.7.b. Rent and Mortgage Payment History."  Lenders Handbook - VA Pamphlet 26-7. U.S. Department of Veterans Affairs, 2020. Web.
"Chapter 10, Attachment 10-A, Rent/Mortgage Payment History." Single Family Housing Guaranteed Loan Program Technical Handbook. U.S. Department of Agriculture, 2020. Web.
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