Refinance Loan Rules: Know Before You Apply
What Are the Rules for FHA Refinance Loans?
The most important rule to know starting out is that you do not have to have (in most cases) an existing FHA mortgage to refinance; you can have a conventional, VA, USDA or other non-FHA mortgage and qualify for a refi.
The only mortgage situation you cannot refinance with an FHA loan is when you are applying for an FHA Streamline (mentioned above). FHA Streamline loans are not permitted on non-FHA mortgages.
But if you want cash out refinancing, an FHA Rehabilitation refinance loan, a simple refinance, rate-and-term, etc. FHA loans are an important option to consider.
FHA refi loan rules require the lender not to charge a penalty for early payoff of the mortgage. FHA refi loan rules say you can qualify to refinance your home once you have owned it and made mortgage payments for a specific amount of time which may vary depending on the type of refinance transaction you seek.
Those who have owned their home and have made mortgage payments longer than one year generally don’t have to worry about such time limits. Those who have owned for less than one year will need to speak to a participating FHA loan officer to see what requirements must be met to apply.
Those who inherited a property and wish to refinance should speak with a loan officer about how state law and lender standards may affect their refinance transaction.
FHA loan rules are not the only ones that must be observed when it comes to refinancing an inherited property, and FHA loan rules do not override state or local ordinances that may affect the transaction.
Refinance loans guaranteed by the FHA do not permit “excessive cash back” unless you are getting a refund at closing time for costs paid up front but later financed, or other types of legitimate refunds. Cash-out refinancing and the FHA Reverse Mortgage (also known as an FHA Home Equity Conversion Mortgage or HECM) are the only two kinds of FHA refinancing options that permit more cash back than from refunds.
Talk to a lender if you are not sure how these rules affect your refinance transaction, and it’s a very good idea to consider comparing lenders to see who can offer you the best deal on your refi loan regardless of your needs for cash out at closing time.
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