Many people do not realize that FHA mortgage rates are equal to and sometimes even lower than a Conventional mortgage. Homeowners who would like to consider lowering their payments or getting out of an adjustable rate mortgage should seriously consider one of the FHA refinance programs. There are three types of FHA refinance loansac: Streamline Refinance, No Cash-Out, and Cash-Out.
Streamline refinances were designed to lower monthly payments on FHA mortgages only. They can be done with or without an appraisal, and with or without credit qualification. The streamline refinance does not allow for any cash back to the borrower.
Loan Type Conversion Allowed
1. 30 yr fixed to 30 yr fixed: The new payment must be lower than the old payment.
2. 30 yr fixed to 15 yr fixed: New payment cannot be more than $50 higher. Note: 15 yr fixed to 30 yr fixed is not allowed.
3. Fixed Rate to ARM: Owner occupied homes only
4. Adjustable Mortgage to Fixed Mortgage
5. ARM to ARM: Rate must be lower than current
loan
6. 203k to 203b
FHA Streamline Refinance Without An Appraisal
The new loan amount cannot be more than the original loan amount, OR more than the current principal balance plus closing cost. ... Whichever is less. This only applies to owner occupied as non-owner occupied borrowers can only refinance the existing balance, and do not have the option of rolling in the closing costs.
The only credit verification required is mortgage payments. This can be done with 12 copies of canceled checks, front and back. If canceled checks are available, no in-file report is required unless the underwriter prefers that method to verify mortgage payments.
Streamline Refinance With An Appraisal Required
A FHA streamline refinance with appraisal allows the homeowner to finance the closing costs, points, and prepaids if all fits within the loan to value limits. The loan amount may be the current principle plus closing costs, points and prepaids, OR, the appraised value x 97.75% (97.65%, or 97.15%, high or low cost state). Whichever is less!
IF the smallest of these two values is greater than the original mortgage balance credit verification is required.
FHA Streamline Refinance - Credit Qualifying
The loan is calculated based on the previous formulas. Qualifying requires employment verification, credit report, and debt to income compliance. These loans are usually used when the mortgage payment will be higher, deletion of a borrower on the refinanced mortgage, or in assumptions involving due-on-sale clauses.
FHA - No Cash Out - Refinance
This FHA no-cash-out refinance can be used to refinance a FHA mortgage, a VA mortgage, a conventional mortgage, or a non-conforming mortgage and requires the borrower to fully qualify. Second mortgages may be included in the new loan if they are older than one year, if not older than one year, you must prove that the funds were used solely to repair or rehabilitate the home. If not, paying off or including these loans would be considered a cash-out refinance.
This FHA loan can be used to buy out the equity of an ex-spouse provided it is documented in the divorce. It is still considered a no-cash-out because this equity is considered indebtedness.
If the home was purchased less than a year ago and is not currently a FHA loan, the loan amount will be the appraised value plus closing cost, OR the original sales price plus closing cost. Whichever is less!
If the purchase was made more than a year ago and is not currently FHA, the loan amount would be calculated the same as a streamline refinance "with" an appraisal as explained above.
FHA Mortgage - Cash Out - Refinance
This great loan can be used to refinance a FHA loan, a VA loan, or a Conventional loan. The advantage: Max loan to value is 90% for conventional loans but FHA loans allow 95% plus a portion of the closing costs.
About the Author
Connie Sanders owns a very educational web site that was designed to educate the consumer of FHA mortgage guidelines. The knowledge acquired from her site will help them understand the loan process and prevent them from being misled. For more education go to: fha underwriting guidelines http://www.fha-mortgageunderwriters.com
This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.
