May 25, 2017
If you have an existing home loan, you may be qualified to apply to refinance that loan with an FHA mortgage. This option can help you get cash out based on the value of your home, or it can help you get into lower mortgage payments depending on the type of loan you are eligible for. Which FHA refinance loan is right for you?
FHA Cash-Out Refinancing
Cash-out loans are for qualified borrowers with FHA or non-FHA mortgages. Cash out refinancing allows borrowers to get cash back when there is money left over after paying off the original mortgage, plus any applicable fees. Cash-out refinance loans guaranteed by the FHA require both a new credit check and appraisal.
The new appraisal is required in order to determine the current market value of your home. An existing FHA appraisal that has not expired will not be allowed, so borrowers should anticipate the expense of the new appraisal.
Borrowers are permitted to apply for FHA cash-out refinancing if they have an existing FHA loan or an existing conventional or otherwise non-FHA mortgage. Cash out loans may be available from some lenders, but not from others depending on the lender.
Non-Cash Out FHA Refinancing
Non cash-out options may be open to borrowers, too. According to the FHA handbook HUD 4000.1, “No cash-out refinances of FHA-insured and non FHA-insured Mortgages are designed to pay existing liens. These include: Rate and Term refinance, Simple Refinance, and Streamline Refinance.”
Streamline FHA Refinancing
An FHA Streamline Refinancing loan is a type of refinancing that allows no cash back to the borrower (except for refunds of money paid up front for expenses later financed into the loan) and must result in a benefit to the borrower such as a lower monthly payment or interest rate. Streamline loans have no FHA-required credit check or appraisal. Your lender may require one or both depending on the rules of that financial institution.
Streamline loans may result in lower payments, but sometimes they do not for a variety of reasons that are considered exceptions under the FHA loan rules. One of these exceptions is for borrowers refinancing out of adjustable rate loans and into fixed-rate mortgages. The fixed rate is considered a tangible benefit for the borrower.
Talk to a participating lender about these FHA refinance loan options to see what may be right for you.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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