March 11, 2014
FHA loan rules permit the refinance of mortgage loans under a variety of circumstances. Borrowers applying for some types of FHA refinancing can go from conventional to FHA, from adjustable rate mortgages to fixed rate, and for those with existing FHA loans, an FHA-to-FHA streamline refinance is also possible.
Chapter Three of HUD 4155.1 is where the basic rules covering refinance transactions can be found. Chapter Three begins by stating the basic purposes of a refinance loan which include the following:
“A refinance transaction is used to pay off an existing real estate debt with the proceeds of a new mortgage
• for borrower(s) with legal title, and
• on the same property.
Note: The borrower is eligible to refinance the loan, as long as he/she has legal title, even if he/she was not originally on the loan.”
FHA refinance loan rules include guidelines for the maximum loan amount. Chapter Three establishes the maximum FHA refinance loan as follows:
“The maximum percentage of financing for a refinance transaction is governed by
• the occupancy status of the property
• the use of the loan proceeds, and
• how and when the property was purchased.
Generally, the maximum mortgage amount may never exceed the statutory limit, except by the amount of any new upfront mortgage insurance premium (UFMIP). However, the maximum mortgage may exceed the statutory limit on certain specialty products.”
As you can see from the above, there’s no fixed dollar amount for refinance loans guaranteed by the FHA. The final amount depends on the circumstances of the loan.
FHA refinance loans that include an appraisal can have a loan term as long as 30 years. For FHA refinance loans without an appraisal (streamline refinancing), Chapter Three says:
The maximum term of a streamline refinance without an appraisal is limited to the lesser of
• the remaining term of the existing mortgage, plus 12 years, or
• 30 years.”
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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