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FHA Refinance Loans For Your First Home

January 23, 2023

FHA Refinance Loans For Your First Home

Why should first-time home buyers start thinking about their FHA refinance loan options sooner instead of later? It’s not because you are actively planning to refinance, but there are circumstances which may make you reconsider your refi loan options.

As a millennial home buyer, first-time homeowner, or any other type of borrower, unforeseen events or situations may have you re-thinking your long-term financial plans.

There are FHA refinance loan options for first-time home buyers and new homeowners, but some are more appropriate for certain needs than others.

FHA Refinance Loans For Upgrades, Repairs, And Home Improvements

If your home is damaged in a storm, you experience a fire or flood, or need to repair your roof, an FHA 203(k) rehabilitation loan is the refinance you should ask a participating FHA lender about.

Rehab loans (which are available in both new purchase and refi options) can be used to for large or small projects and may be a much better choice than a cash-out refi loan unless the work you wish to have done is not on the list of approved projects.

That would be true if you want to install a new swimming pool, barbecue pit, or hot tub. FHA cash-out refinance loans are better for these purposes because there are no FHA-defined limits on how to use the cash you get back on that transaction.

FHA Cash-Out Refinancing For First Homes

FHA Cash-out refinance loans are available for first homes, but the longer you pay on your mortgage for your starter home, the more borrowing power you potentially have. In areas where property values are on the rise, this appraisal-required FHA refinance option may not require as long a wait for added value on the loan amount due to increases in appraised value.

But you will be required to wait a minimum of six mortgage payments and six full months before you can be considered for a cash-out refinance option.

Bottom line; the more payments you make, the higher the amount of the new loan could be. There may also be tax advantages to using cash-out refi loan funds to improve your home, but you will need to discuss current year’s tax rules in this area with an income tax professional.

Do You Own A First Home? A Starter Home? Energy-Efficient Upgrades Are Available With Most FHA Refinance Loans

No matter whether you choose an FHA Rehab loan (see above), or an FHA cash-out refinance loan, or an FHA Streamline Refinance mortgage (good for existing FHA home loans only), you can apply for additional funds to make approved energy-saving repairs or upgrades.

Ask your loan officer about the FHA Energy Efficient Mortgage option to learn how to add these funds to any FHA refi loan.

Bruce Reichstein - FHA News Author

By Bruce Reichstein

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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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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