August 8, 2022
Getting ready to refinance? Even if you are considering using the same lender that you got your mortgage from originally, there are some important questions to ask your loan officer about the refinance transaction.
Do you know how much your loan will cost? Do you understand the differences between a simple refinance, an FHA Streamline refi loan, and other types of mortgages? Find out more today and get ready to find the best deal for your needs.
FHA Refinance Loan Questions: How Much Will My Loan Cost?
In the earliest stages of the refinance loan process, don’t expect to get exact figures, but do ask your loan officer for estimates based on the typical set of costs for the refinance loan you need.
You may not be charged identical costs as your original mortgage, and you may not be charged certain costs for certain refi loans depending on circumstances.
For example, an FHA Streamline Refinance loan has no FHA-required credit check or appraisal. If your lender does not require them either, those are two expenses you won’t need to worry about.
But there will be others and you should get an early idea of what costs apply to your transaction.
Is This The Right Refinance Loan For My Needs?
An FHA Cash-Out refinance may be totally appropriate for some purposes, while an FHA Rehabilitation refinance loan might be a better choice if the borrower only wants funds to do repairs or upgrades to the home.
Cash-out refinance loans can be used for this purpose, too, but your borrowing power may be better with an FHA Rehab refi depending on variables including how long you have owned the home, how many payments have been made, what the current property values in your area are, etc.
Home repair or upgrade projects can be paid with either an FHA cash-out refi or an FHA rehab refi, but there are trade-offs.
FHA rehab loans do not allow the borrower to add “luxury features” such as a barbecue pit or a pool. But if you want to refinance to add such features, there is no restriction with an FHA cash-out refi. That is just one example of why it can pay to discuss your goals for the loan with your loan officer.
Ask Your Lender If A Refinance Loan Is Right For You At The Present Time
What do we mean by this? There are multiple layers, but when you talk to your loan officer about a refinance loan, be sure to bring your FICO scores to the conversation.
The answer will tell you a lot about whether you are financially ready for the refinance, and in some cases whether you are personally ready for it with your credit and other qualifying factors such as the length of your employment history.
The closer you are to two years of employment history the better overall when applying right out of college or in a new job market.
If you have good FICO scores but not enough time on the job, or if you have stable and dependable income with a higher-than-normal debt ratio, you may need to give yourself more time to work on those issues before you apply. And it is definitely worth the wait.
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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