If You Need to Refinance With an FHA Mortgage
But there are borrowers who may require a refinance regardless of the interest rate environment; not everyone who refinances does so because they want to. A personal financial crisis that makes it harder to pay a mortgage is one reason to consider the refinance loan option if it’s open to you.
Those who may be financially recovering from a natural disaster, for instance, and those who may have lost income during the pandemic may decide to seek out a new loan and even a new lender (depending on circumstances) to explore options to save a home from foreclosure. In such cases, refinancing may be possible if the homeowner acts quickly enough.
What does that mean? Basically, your ability to refinance the loan instead of needing a loan modification or loan forgiveness depends on working out details with the loan servicer to address the problem before you get too far behind on your mortgage payments.
The longer you wait to act on a loan that’s fallen behind, the fewer your potential options may be. Some refinance loan options aren’t right for those trying to avoid foreclosure. Cash-out refinances aren’t an option in such cases, but other types may be possible including FHA No-Cash-Out and FHA Simple Refinancing.
Foreclosure avoidance isn’t the only reason to consider a refinance loan. Natural disasters across the nation see many homeowners considering options such as the FHA 203(k) Rehabilitation Refinance Loan to repair or replace homes damaged by floods, mudslides, hurricanes, wildfires, tropical storms, and other natural incidents.
Your ability to apply for an FHA 203(k) Rehabilitation Refinance is not affected by a time limit, but there is another resource called the FHA 203(h) Rehabilitation Loan, which is designed specifically for disaster victims.
You will need to act without delay as the 203(h) is not offered indefinitely. The 203(h) loan is only available to you to apply for a year after the disaster strikes. FHA 203(h) loans are only for those in federally-declared disaster areas. Talk to a participating FHA lender about these options should you need them.
In this article, we’ve talked about the need to refinance when a borrower falls behind on the mortgage, and when a borrower has a home that needs repair after a natural disaster.
It is possible to experience both at the same time, and in general, the same rules apply. The sooner you make arrangements with your loan servicer to address the late or missed payments, the more options you have open to you.
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