Refinance Choices Available With FHA Loan Programs
Which refi is the best for your needs? That’s the first question to ask about refinancing; you can select Cash-Out refinancing, FHA Streamline refi loans are for people who need a lower mortgage rate or lower payment, and FHA 203(k) Rehabilitation refinance loans (also available as purchase loans) that permit you to refinance and remodel the home at the same time.
Refinance Loan Issues
If you need to refinance, it is a very good idea to get your current lender’s terms and conditions first, then ask other participating FHA lenders to provide you with their interest rates, closing costs, and other requirements. Compare these lenders carefully--don’t assume all banks or financial institutions have identical rates and terms. They don’t!
One important issue for some borrowers is the length of time they have been paying on their mortgages before trying to refinance.
If you haven’t been paying on your home loan for more than six months, it’s a very good idea to check with your lender to make sure you know the minimum payment requirements for the loan you seek. Cash-out refinance loan rules may be affected by state law or other variables.
On-Time Payments Matter
Borrowers who haven’t owned their homes very long should expect scrutiny on their payment record. If you haven’t made on-time payments on your home loan in the year leading up to a refinance loan application, this can hurt your chances for loan approval.
Naturally, borrowers who are refinancing to correct previous missed payments will discuss the options with a loan officer and make arrangements to refinance and catch up.
But if you are applying for a cash-out loan, don’t expect your loan officer to be as flexible in this area. Cash-out loans require the borrower to show they are a good credit risk.
Refinancing From Non-FHA to FHA
Most FHA refinance loans will allow an FHA-to-FHA refinance OR a non-FHA-to-FHA refi. Borrowers can refinance out of higher interest rate conventional mortgages into a lower-rate FHA loan by applying for a no-cash FHA refinance. Borrowers can get out of adjustable rate mortgages in the same way.
There is only one refinance loan offered by the FHA that does not permit non-FHA refinance options and that is the FHA Streamline Refinance loan, which is designed specifically to refinance existing FHA mortgages and provide a tangible benefit to the borrower such as a lower rate, lower payments, getting out of an adjustable rate mortgage, etc.
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