Home Loan Refinancing: Appraisal Required vs. No-Appraisal
The mandatory FHA appraisal is one such requirement affected by the nature of your refi loan transaction; this is because for certain refi loans you can get cash out, or you can get a no-FHA-required-appraisal refi loan, but not both.
FHA Home Loan Rules for Cash Out Refinance Loans
If you want to refinance a mortgage with cash back at closing time, you may apply for an FHA Cash-Out Refinance loan. These refinance transactions are intended for any kind mortgage, whether FHA, conventional, VA, etc.
Cash-out refinance loans will ALWAYS require a new appraisal because the mortgage amount is based on the current appraised value of the home, rather than the original appraised value at purchase time.
Cash-out refinance loans require a new credit check, too; your lender needs to make certain you are a good credit risk. You can never get cash out on an FHA refinance without a new appraisal and credit check.
No-cash-out refinance loans that involve non-FHA mortgages will also require a new credit check and appraisal. The same is true for FHA Reverse Mortgages (also known as Home Equity Conversion Mortgages).
Rules for FHA Streamline Refinance Loans
FHA Streamline loans are meant only for existing FHA mortgages and cannot be used to refinance any other kind of loan. Streamline refi transactions are easier because there is no FHA-required credit check or appraisal due; borrowers can apply for FHA Streamline refi loans even if they have lost a job recently.
Streamline refinance loans require some benefit to the borrower in most cases; you and your lender will need to determine your priorities for the refinance loan to see what benefit may apply in your circumstances. You could be eligible for a lower monthly payment, a lower interest rate (or both), you could be trying to get out of an adjustable rate mortgage, etc.
FHA Streamline Refinance loans have no mechanism for providing cash back to the borrower; you cannot receive money at closing time that is not in the form of a legitimate refund.
Streamline loans are excellent for getting into lower payments or interest rates, but beware add-ons to the loan that could increase your monthly payments. Ask your lender to help you decide what to include in the loan amount and what to pay up front.
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Insuring Mortgages With the FHA Funding Fee
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