June 16, 2014
FHA loan rules governing refinance loans are found in HUD 4155.1, Chapter Three. In this chapter the FHA lists some basic rules that can and do affect all FHA refinance loans. Knowing these rules can help you better understand the FHA refinance loan process.
For example, did you know that FHA loan rules say that even when an FHA appraisal is still valid on a property (they are valid for six months), you cannot re-use the same appraisal for an FHA refinance that was used to purchase the home originally? Chapter Three states:
“FHA appraisals on existing properties are valid for six months. However, appraisals cannot be reused
• during the six month validity period once the mortgage for which the appraisal was ordered has closed, or
• for a subsequent refinance, even if six months have not passed.
A new appraisal is required for each refinance transaction requiring an appraisal.”
Other guidelines include a requirement for the borrower to be current on the mortgage loan for the month of the loan closing. “The borrower must be current on the loan being refinanced for the month due prior to the month in which he/she closes the refinancing, and for the month in which he/she closes.
Example: If the borrower is closing on April 8, he/she must have made the March payment within the month of March, and the April payment by closing. The April payment may be included in the payoff amount at closing.”
The FHA loan rulebook goes even further here, expressly telling the lender that skipped payments on FHA loans are not allowed. When you refinance, you can’t drop one payment on the old mortgage in favor of the new loan.
For refinance loans on manufactured housing, FHA loan rules state, “For a transaction involving a manufactured home to be considered a refinance, the manufactured home must
• have acceptable property status
• be complete, and
• have been permanently erected on a site for more than one year (12 months) prior to the date of the application for mortgage insurance.”
You may find it difficult in some cases to find a lender willing to refinance a manufactured home in the current housing market lending climate, so this section of Chapter Three is presented for informational purposes only.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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