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How many refinance loan options exist in the FHA loan program? There are more refi loan choices to make than you might think. Some wonder if they should pay for discount points on their loan to reduce the amount of interest paid or get a fixed-rate vs. adjustable rate mortgage.

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How Many Types of FHA Refinance Loans Are There?

February 22, 2022

How Many Types of FHA Refinance Loans Are There?
How many refinance loan options exist in the FHA loan program? Quite a few. There is the cash-out and no-cash-out option as with most refi programs, but you also have the option to apply for an FHA 203(k) Rehabilitation Refinance, an FHA Streamline Refinance (for existing FHA mortgages), and even a Reverse Mortgage also known as an FHA Home Equity Conversion Mortgage or FHA HECM.

Terms And Conditions for Your Refinance Loan

Terms and conditions for these loans will vary, and the type of refi you seek may have some unique features other refinance loans don’t; one good example applies to those who want to an FHA Home Equity Conversion Mortgage.

FHA HECM loans feature an age requirement. All applicants must be aged 62 or older and be close to owning your home outright if you don’t already. But such rules are definitely NOT true for other FHA refinance options such as FHA Cash-Out Refinancing or FHA Simple Refinance loans.

Many Options Are Possible

There are more refi loan choices to make than you might think. Some wonder if they should pay for discount points on their loan to reduce the amount of interest paid. But before you get to that decision you’ll want to decide whether to commit to a fixed-interest refinance or an adjustable-rate loan instead.

Adjustable-rate mortgages are good for borrowers who have a specific plan for their mortgage--do you plan to sell the home in a few years or keep it for the lifetime of the loan? That alone may affect your choices when deciding between fixed rates and adjustable-rate loans. If you aren’t sure what your decisions should be when the first interest rate adjustment is scheduled, you might need to do some more research on this type of loan before you commit.

Other choices to make when picking your refi loan? Deciding if you just want to refinance or add upgrades and improvements at the same time. Or do you want to get cash back at closing time? 

Some refinance loan choices are obvious--you are also not required to have an existing FHA mortgage for certain types of FHA refinance loans. If you need to refinance a non-FHA mortgage you can select a cash-out option, an FHA 203(k), or a no-cash-out refinance option. 

But if you need a refi for a specific benefit like a lower monthly payment AND you have an existing FHA loan, your choice is most likely going to be an FHA Streamline Refinance which typically results in a benefit to the borrower like a lower payment. 

Some FHA refi options ARE restricted to existing FHA loans. An FHA Streamline Refinancing loan is one--this is a no-cash-out refinance for those who currently have an FHA home loan.

Loan Types and Choices

So far we have discussed FHA Cash-Out Refinancing, FHA Reverse Mortgages, And FHA 203(k) Rehab Refinance Loans. All of these loan options come with choices including the term of your mortgage (15 or 30 years) as well as the fixed-rate and adjustable-rate choices. 

But what if you want to refinance your loan but the participating lender does not offer the type of loan you want? How does that affect your loan choices? Is the borrower limited to what the current lender has to offer?

The good news in these cases is that you do not have to use your existing lender to refinance your FHA mortgage. If your participating lender won’t do an FHA 203(k), for example, you are free to shop around for one that will. You don’t actually need an excuse to look for other lenders as shopping around for a loan is the smartest thing you can do if you want to get more competitive rates and terms.

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