March 22, 2017
There are many reasons why people refinance a home loan. Some do it to lower their interest rates, others may wish to cash in on the equity built up in the home over time. Still others might want to do upgrades or repairs to the home but don’t want to pay all the costs out-of-pocket. The reasons you refinance may vary, and for that reason there are a variety of choices when it comes time to consider an FHA refinance loan.
Lower Interest Rates
The FHA streamline refinance option lets borrowers apply for a loan using their original loan application data. There is no FHA requirement for a new credit check or appraisal. (Your lender may require one or both.) FHA streamline refinance loans must result in a tangible benefit to the borrower in the form of a lower rate, lower payments, refinancing out of an adjustable rate loan into a fixed rate mortgage, etc. FHA Streamline refinance loans are for FHA-to-FHA refinances only.
Getting Out Of A Conventional Mortgage
FHA loan rules permit borrowers to refinance out of non-FHA mortgage loans into FHA loans. The advantage of refinancing into an FHA loan include lower rates (depending on the lender and the borrower’s credit qualifications), but also the ability to refinance with added funds for upgrades or improvements (approved by the lender) in something known as an FHA Energy Efficient Mortgage loan. Ask your loan officer how to apply for the FHA EEM when you go to refinance.
Cash-Out
Some want to refinance their mortgage in order to take cash out on the deal. This is permitted with FHA mortgages. FHA cash out refinance loans require a new credit check and appraisal, and the money left over after the original mortgage has been paid off along with any expenses or fees would go to the borrower for any purpose acceptable to the lender.
Reverse Mortgage
FHA reverse mortgage loans, also known as Home Equity Conversion Mortgages, are available for qualified borrowers aged 62 or older who either own their property or are very close to paying off the mortgage. FHA HECM loans don’t have a monthly payment and these loans offer cash to the borrower based on the appraised value of the home and other factors. FHA HECM loans are declared due in full when the borrower dies or sells the home.
The FHA loan rules for this type of mortgage require all borrowers to receive HECM counseling from an approved source so that all rights and responsibilities are fully understood at closing time.
A participating loan officer can explain these options to you in detail, addressing your specific needs.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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