When is an FHA loan a good idea? There are plenty of new purchase options, but those who have existing home loans and want to refinance into lower payments or interest rates should also explore their FHA mortgage options.
FHA Loans Are For Those Who Want To Refinance FHA Loans
Borrowers with existing FHA mortgage loans should consider the FHA Streamline Refinance loan option. This type of FHA refi loan does not offer money back to the borrower (except for refunds of money paid up front for things that later get financed into the loan amount) but does require a benefit to the borrower in one of several forms:
- A lower monthly payment
- A lower interest rate
- A fixed rate (when refinancing out of an adjustable rate mortgage loan)
There are also non-streamline FHA-to-FHA refinance loans available including no cash out loans and FHA Cash-Out Refinancing. Cash-out refinance loans require a new appraisal and credit check, and money back to the borrower is permitted once the original loan and any associated costs of the loan are paid off.
FHA Loans Are For Those Who Want To Refinance Conventional or Non-FHA mortgages
The FHA loan program allows borrowers to refinance non-FHA mortgages with cash-out refinance loans or no-cash-out FHA refinancing. You do not have to have an existing FHA loan to refinance your property with a new FHA home loan.
FHA Streamline Refinance loans aren’t available for non-FHA mortgages, but most other FHA refi options are available for you if you have a conventional or otherwise non-FHA mortgage you need to refinance.
FHA Loans Are For Those Who Want To Tap Into Equity
For qualified borrowers aged 62 or older, the FHA Reverse Mortgage loan (also known as a home equity conversion mortgage or HECM for short) is an option worth considering. This type of FHA mortgage is quite different than other FHA refinance loans.
Borrowers are required to either own their homes completely or be vary close to doing so. FHA HECM loans require mandatory counseling to insure that borrowers and lender staff alike understand what the process is and how it differs from a standard FHA or conventional mortgage. FHA Reverse Mortgages have an occupancy requirement and the borrower(s) must remain current on all property taxes and related expenses.
Your payout for a Reverse Mortgage depends on the terms of your loan and whether you are in a fixed rate or adjustable rate HECM. If you are interested in an FHA HECM loan, know that there are no monthly mortgage payments required and the loan will become due when the borrower dies or sells the home. Talk to your participating lender about the FHA Reverse Mortgage program and whether it is right for you.