FHA Refinance Loan Rules You Should Know
September 5, 2021
If you are considering a refi loan, an FHA mortgage can help you refinance a conventional, VA or other non-FHA mortgage.
You also have multiple options if you have an existing FHA mortgage including a Streamline Refinance option that can help you get a benefit such as a lower monthly payment, lower mortgage rates, or getting out of an adjustable-rate mortgage.
Refinancing is a good option for many reasons, but FHA Streamline offers a net tangible benefit such as those mentioned above.
Some refinance loans are specifically to get a better deal. But others need to refinance to help avoid further hurting their credit scores or going into loan default because of missed payments. Refinancing the original loan amount can be more helpful for some borrowers if they choose to pay closing costs up front rather than including them into the loan amount.
A borrower who gets behind on the old loan can catch up with the new loan, but time may be of the essence. If you are facing a scenario where a refinance could help you catch up on your home loan payments, act NOW to avoid further complications--you'll be glad you did.
It's true that there are FHA cash-out refinancing options and for some borrowers, this is a great option. But cash-out refi isn't such a great choice if you haven't owned the home for long or haven't made many mortgage payments. Cash-out loans require equity in the property that may not be reached right away without a larger down payment and bigger mortgage payments.
But fortunately there are these other FHA refinance options including no-cash-out refinances, and the previously mentioned Streamline options.
Non-cash out refinance options for FHA mortgages include rate-and-term refinancing (which can include conventional-to-FHA refi, FHA-to-FHA, etc,) FHA Streamline Refinances with appraisals and FHA Streamline Refi options with no FHA-required appraisal.
FHA rate-and-term refinance loans may require you to have your mortgage current at application time. HUD.gov, the Department of Housing and Urban Development official site, states clearly, “If the property was acquired less than one year before the loan application and is not already FHA-insured...the original sales price of the property also must be considered in determining the maximum mortgage.”
For FHA Streamline Refinances with an appraisal (which the lender may require depending on circumstances), your FHA home loan must not be delinquent, the loan MUST be an existing FHA mortgage, and the loan must generally result in a borrower benefit such as the lower mortgage payment, lower interest rate, moving into a fixed-rate mortgage, etc.
Some are surprised to learn that FHA streamline refinance options come with or without an appraisal requirement depending on circumstances. The same is true of a new credit check--there is no FHA-required credit check but your lender may require one or both.
Homeowners should know that if you want to refinance your current mortgage with an FHA Streamline refinance option at least six payments must have been made on the loan to be refinanced for you to be considered.
Furthermore, in situations where the FHA mortgage has been modified, the borrower is required to make at least six payments under the agreement before applying to refinance;
A minimum of six months must have passed since the first payment due date of the Mortgage that is being refinanced and at least 210 days must have passed since the closing date of the mortgage being refinanced.
In cases where an FHA loan has been assumed, six payments must have been made under the loan assumption agreement in order to meet FHA and HUD guidelines for loan approval under this program.
------------------------------
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
You also have multiple options if you have an existing FHA mortgage including a Streamline Refinance option that can help you get a benefit such as a lower monthly payment, lower mortgage rates, or getting out of an adjustable-rate mortgage.
Refinancing is a good option for many reasons, but FHA Streamline offers a net tangible benefit such as those mentioned above.
Some refinance loans are specifically to get a better deal. But others need to refinance to help avoid further hurting their credit scores or going into loan default because of missed payments. Refinancing the original loan amount can be more helpful for some borrowers if they choose to pay closing costs up front rather than including them into the loan amount.
A borrower who gets behind on the old loan can catch up with the new loan, but time may be of the essence. If you are facing a scenario where a refinance could help you catch up on your home loan payments, act NOW to avoid further complications--you'll be glad you did.
It's true that there are FHA cash-out refinancing options and for some borrowers, this is a great option. But cash-out refi isn't such a great choice if you haven't owned the home for long or haven't made many mortgage payments. Cash-out loans require equity in the property that may not be reached right away without a larger down payment and bigger mortgage payments.
But fortunately there are these other FHA refinance options including no-cash-out refinances, and the previously mentioned Streamline options.
Non-cash out refinance options for FHA mortgages include rate-and-term refinancing (which can include conventional-to-FHA refi, FHA-to-FHA, etc,) FHA Streamline Refinances with appraisals and FHA Streamline Refi options with no FHA-required appraisal.
FHA rate-and-term refinance loans may require you to have your mortgage current at application time. HUD.gov, the Department of Housing and Urban Development official site, states clearly, “If the property was acquired less than one year before the loan application and is not already FHA-insured...the original sales price of the property also must be considered in determining the maximum mortgage.”
For FHA Streamline Refinances with an appraisal (which the lender may require depending on circumstances), your FHA home loan must not be delinquent, the loan MUST be an existing FHA mortgage, and the loan must generally result in a borrower benefit such as the lower mortgage payment, lower interest rate, moving into a fixed-rate mortgage, etc.
Some are surprised to learn that FHA streamline refinance options come with or without an appraisal requirement depending on circumstances. The same is true of a new credit check--there is no FHA-required credit check but your lender may require one or both.
Homeowners should know that if you want to refinance your current mortgage with an FHA Streamline refinance option at least six payments must have been made on the loan to be refinanced for you to be considered.
Furthermore, in situations where the FHA mortgage has been modified, the borrower is required to make at least six payments under the agreement before applying to refinance;
A minimum of six months must have passed since the first payment due date of the Mortgage that is being refinanced and at least 210 days must have passed since the closing date of the mortgage being refinanced.
In cases where an FHA loan has been assumed, six payments must have been made under the loan assumption agreement in order to meet FHA and HUD guidelines for loan approval under this program.
------------------------------
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we'll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner's Insurance
Step 9: What to Expect at Closing
Do you know what's on your credit report?
Learn what your score means.
