There are many reasons to consider an FHA refinancing loan. Some borrowers want to refinance out of an adjustable rate mortgage, others want to refinance out of a more expensive conventional mortgage, while others still want to take out some of the cash value in their home.
Do you know what your FHA refinancing loan options are?
According to HUD 4000.1, the rule book for all FHA single-family mortgages, there are a variety of options:
1. No cash-out refinances of FHA-insured and non FHA-insured Mortgages. This type of FHA refinancing is meant to pay off existing liens. These include: Rate and Term refinance, Simple Refinance, and Streamline Refinance.
3. Refinances of non FHA-insured Mortgages are available for qualified Borrowers in negative equity positions (Short Refi).
4. Refinances for rehabilitation or repair (Section 203(k)).
Many of these loans require credit checks and new appraisals; any refinance loan where cash is potentially available to the borrower would include both. Streamline refinancing options, which are available only for FHA-to-FHA refinancing, have no FHA-required credit check or appraisal. Your lender may require one or both depending on circumstances.
No-cash out refinancing for non-FHA mortgages are available to qualified borrowers. You do not have to use your current lender to do this, any participating FHA lender is able to help you get into a new loan. The same goes for those refinancing FHA-to-FHA. Your current lender doesn’t have to be the one who helps you with the new mortgage.
FHA loan rules include an occupancy requirement. When you apply for refinancing, especially if you are refinancing out of a conventional or non-FHA loan into an FHA mortgage, you will be required to certify that the home being refinanced is your primary residence or will be within 60 days of loan closing.
FHA 203(k) and 203(h) rehab loans have different occupancy requirements. It’s understood that borrowers may not be able to live in the property right away as repairs are being made on the property. The “60 day rule” for occupancy likely won’t be possible with some 203 rehab loans. Your loan officer will discuss the occupancy rules based on the specific needs of your project.