June 8, 2017
Do you have an existing FHA loan and want to know how soon you can refinance it? Are you paying a monthly mortgage payment on a conventional loan and want to refinance into an FHA mortgage? Refinancing can help borrowers get into lower mortgage payments and/or interest rates, but FHA refinance loans are also helpful for getting into a fixed rate loan and out of an adjustable rate.
As you can tell from that brief list of refinance options, not all refinance loans are the same. In a previous blog post we discussed the rules for FHA cash-out refinance loans. Now let’s look at how soon you can refinance a mortgage loan with no cash out.
The rules for FHA no cash out “rate-and-term” refinancing loans are found in HUD 4000.1, which explains that there are two different sets of requirements depending on how long you have owned the property.
“For all mortgages on all properties with less than six months of Mortgage Payment history, the Borrower must have made all payments within the month due. For all mortgages on all properties with greater than six months history, the Borrower must have made all Mortgage Payments within the month due for the six months prior to case number assignment and have no more than one 30-Day late payment for the previous six months for all mortgages.”
Borrowers will find it easy to understand how no cash out refinancing loans differ from their cash back counterparts in that since the borrower is not taking equity from the home and converting it to cash, the requirements differ for transactions that don’t feature cash out.
No cash out loans have varying LTVs depending on how long the borrower has owned the home before the new FHA loan case number has been assigned. From HUD 4000.1:
“The maximum LTV for a Rate and Term refinance is:
-97.75 percent for Principal Residences that have been owner-occupied for previous 12 months, or owner-occupied since acquisition if acquired within 12 months, at case number assignment;
-85 percent for a Borrower who has occupied the subject Property as their Principal Residence for fewer than 12 months prior to the case number assignment date; or if owned less than 12 months, has not occupied the Property for that entire period of ownership…”
There is an occupancy requirement for FHA rate-and-term loans. HUD 4000.1 states: “Rate and Term refinance transactions are only permitted on owner-occupied Principal Residences and HUD-approved Secondary Residences.”
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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