December 11, 2018

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When Should I Refinance My Home Loan?

When Should I Refinance My Home Loan?

When should I refinance my home loan? That is an important question for borrowers who realize they want to cash in on rising property values, commit to home improvements, or get into a lower monthly mortgage payment. FHA refinance loans can help.

FHA Refinance Loans For Conventional And Other Non-FHA Mortgages

Did you know you can refinance into an FHA mortgage from a non-FHA home loan? Compare interest rates on your existing mortgage to those offered for FHA refi loans to see if it’s to your benefit to refinance.

Are you in a conventional adjustable rate mortgage and want to get into an FHA fixed-rate loan? This is an option, too. Fixed rate mortgages are an excellent choice if you decide to remain in the home long-term and want to get out of the adjustable rate situation.

Some borrowers want to cash in on the rising value of their property. If you are an owner occupier and want to apply for an FHA cash-out refinance loan, this is definitely possible with non-FHA mortgages. You do not have to have an existing FHA loan to apply for cash out refinancing on your current home loan.

A new credit check and appraisal are required for all FHA cash-out transactions but in times where property values are rising in certain housing markets, the new appraisal is definitely a potential advantage.

FHA Refinance Loans For Rehab, Repairs, And Renovations

FHA and non-FHA home loans alike can be refinanced as FHA 203(k) rehab loans, which allow the borrower to get funds for approved rehab and remodeling work. A limited 203(k) is a smaller loan amount for approved projects that don’t involve major structural work. The full 203(k) rehab loan can be used for major projects.

All rehab work must be FHA and lender-approved, and no cash is permitted back to the borrower with these transactions except in the form of refunds for money paid up front but later financed into the loan or similar situations. The FHA Rehab Loan (203 (k)) is not permitted to be treated like a cash-out refi.

FHA Refinance Loans For Existing FHA Mortgages

All of the loans mentioned above are also available for existing FHA mortgages, but there is also another FHA refi option that is only for existing FHA mortgages; the FHA Interest Rate Reduction Refinance Loan also known as an FHA IRRRL.

These refi loans are intended to help the borrower get into a lower mortgage payment, lower interest rate, or out of an adjustable rate mortgage and into a fixed rate loan. FHA IRRRLs do not have an FHA-required credit check or appraisal. Your lender is permitted to require one or both depending on circumstances, but there is (in general) no FHA-mandated credit check

FHA IRRRLs generally require a benefit to the borrower in one of the forms mentioned above. But they also permit certain add-ons such as added funds energy efficient upgrades to the home, financing of certain expenses, etc.

These add-ons may increase the borrower’s mortgage payment; if the payment increases too much the lender may be required by the FHA to run a credit check to determine the borrower can afford the new loan.

FHA-to-FHA refinance loans can be accomplished using your existing lender or you can shop around for a new lender. Who has the most competitive terms and conditions for your new loan? You may be surprised at your options.

Bruce Reichstein - Staff Writer

By Bruce Reichstein

August 9, 2018

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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