Things to Remember When Refinancing
Are You Interested in Skipping Payments When You Refinance?
FHA loan rules do not allow you to skip payments when you refinance. For some refi loans you will be required to be current on the mortgage as a condition of loan approval.
For refinance loans that are intended to help the borrower avoid loan default and foreclosure, some method of bringing the loan current is required, whether that’s loan modification (you work this out between yourself and the lender), adding a payment to the end of the mortgage, or other means.
In some cases missed payments may be forgiven, but that is something you will need to negotiate with the lender; forgiven payments are not considered “skipped” payments.
Are You Interested in Getting Cash Back?
Cash-out refinancing is possible, but only one FHA refinance loan offers this. The FHA cash-out loan provides cash back to the borrower once the original loan is paid off and other expenses are settled. But no other FHA forward mortgage or refi loan does this. You cannot get cash back from an FHA Streamline Refinance (for FHA-to-FHA mortgages), an FHA Simple Refinance, or an FHA Rate-and-Term refi.
Credit Scores Count for All Cash-Out Options
Any loan that provides cash back to the borrower including FHA Reverse Mortgages and FHA Cash-Out Refinance loans will require both a new appraisal and a new credit check.
Cash-Out Refi Loans Require Minimum Payment Histories
You can’t apply for an FHA cash-out refinance loan until you have made six months worth of payments and have owned the home for six months. If you have had any delinquencies in the past 12 months you may have a harder time getting loan approval for a cash-out refinance.
FHA Loan-To-Value (LTV) Limits
The LTV limits are important as some borrowers may not be sure which refinance option is best for them. FHA Cash-out offers up to 80% of the value of the home (after a new appraisal). FHA Streamline Refinance loans have no FHA-required appraisal, no FHA-imposed LTV restrictions, and the general purpose of Streamline Refi loans is to help the borrower in some way with either a lower payment, lower interest rate, or moving out of an adjustable rate loan into a fixed rate mortgage.
FHA Streamline loans are limited to existing FHA mortgages and cannot be used to refinance non-FHA home loans.
FHA Loans Have Eligibility Requirements
The U.S. Government Backs Mortgages Through the FHA
Financed Properties Must Meet FHA Minimum Standards
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