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Fha Refinance

Feb 8, 2008
FHA mortgages have always been very good loans for the homebuyer. In today's market the FHA refinance programs offer maximum benefits to the homeowner that wants to lower payments or get out of an adjustable rate mortgage. FHA offers three types of refinance mortgage loans: Cash-Out, No Cash-Out, and Streamline Refinance.

The streamline refinance has several variations. It can be done with an appraisal or without one. Under some situations the owner does not have to requalify for the mortgage. No cash-out is allowed with this loan.

Allowed Conversions:

1. 30 yr fixed rate to 30 yr fixed rate: The new payment must be lower.

2. 30 yr fixed to 15 yr fixed: Payment cannot be more than $50 higher.

3. Fixed Rate Mortgage to Adjustable Rate Mortgage: Owner occupied homes only

4. ARM to Fixed Rate

5. Adjustable to Adjustable

6. 203K to 203B

Streamline Refinance "Without" An Appraisal:

The new loan amount may not be more than the original loan amount, OR more than the current principle balance plus closing cost, ... Whichever is less. This only applies to owner occupied properties as non-owner occupied borrowers can only refinance the existing balance, and do not have the option of rolling in the closing costs.

The only credit verification required is a verification of mortgage payments. This can be done with 12 copies of cancelled checks, front and back. IF cancelled checks are available, no in-file report is required unless the underwriter prefers that method to verify mortgage payments.

Streamline Refinance "With" An Appraisal Required:

Performing an appraisal allows the borrower to finance in the closing costs, discount points, and prepaids provided it all fits within the loan to value limits. The new loan amount may be the current principle plus closing costs, discount points and prepaids, OR, the appraised value x 97.75%. Whichever is less!

If the lowest of these two values is more than the original mortgage balance credit verification is required.

Streamline Refinance - "Credit Qualification Required":

The loan is calculated based on the previous formulas. Qualifying requires employment verification, credit report, and debt to income compliance. These loans are usually used when the mortgage payment will be higher, deletion of a borrower on the refinanced mortgage, or in assumptions involving due-on-sale clauses.

FHA Mortgage "No Cash Out" Refinance:

This no-cash-out refinance loan may be used to refinance a FHA mortgage, a VA mortgage, a conventional mortgage, or a non-conforming mortgage and requires the borrower to fully qualify. Second mortgages may be included in the new loan if they are older than one year, if not older than one year, you must prove that the funds were used solely to repair or rehabilitate the home. If not, paying off or including these loans would be considered a cash-out refinance.

This loan can be used to buy out the equity of an ex-spouse provided it is documented in the divorce papers. It is still considered a no-cash-out because this equity is considered indebtedness.

IF the property was purchased less than a year ago and is not currently an FHA loan, the loan amount will be the appraised value plus closing cost, OR the original sales price plus closing cost. Whichever is less!

If the purchase was made more than a year ago and is not currently FHA, the loan amount would be calculated the same as a streamline refinance "with" an appraisal as explained above.

FHA "Cash Out" Refinance:

This FHA loan can be used to refinance a FHA loan, a VA loan, or a Conventional loan. The advantage: Maximum loan to value is only 90% for Conventional loans but FHA allow 95% plus a portion of the closing costs.
About the Author
Connie Sanders built a web site to help homebuyers learn FHA guidelines
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