March 28, 2017
FHA refinance loans are an option for borrowers with existing FHA mortgages. But there are also options for non-FHA borrowers to refinance into FHA loans and get the benefits of having a lower interest rate or other options that come with FHA mortgages.
Refinancing a home loan can have a variety of benefits depending on the financial needs and goals of the home owner. There are many reasons to refinance including the desire to get into a lower interest rate, to get out of an adjustable rate mortgage, and sometimes even to fund repairs and upgrades to the property.
What does it mean to refinance a home loan? The answer depends on the type of transaction you need and the reasons you wish to refinance. For those who are looking for a lower mortgage payment, refinancing seems fairly simple. The borrower applies for a new mortgage loan that pays off the old mortgage and gets the borrower into more favorable terms that result in a lower payment or interest rate.
For FHA-to-FHA transactions this can be accomplished using an FHA streamline refinancing loan, which has no FHA required credit check or appraisal. Depending on the lender, one or both may be required anyway but from the FHA loan rules neither is a minimum requirement. FHA streamline refinance loans are for existing FHA mortgages only and according to HUD 4000.1 must result in either a lower interest rate or monthly payment, with some exceptions made depending on the nature of the refinance transaction.
For example, borrowers who refinance out of an adjustable rate mortgage into a fixed rate loan may not get a lower monthly payment or interest rate per se, but the advantage of the fixed rate mortgage is considered a tangible benefit and therefore makes the loan possible.
For non-FHA mortgages, its possible to refinance into an FHA loan and take advantage of potentially lower rates, especially if the borrower is currently paying on a conventional loan or an adjustable rate mortgage. FHA cash-out refinancing and non-cash-out FHA refinance loans are possible. When applying for these types of refinance loans, a new credit history check and appraisal will be required, so borrowers should anticipate these expenses and save accordingly.
FHA refinancing loans are available through participating lenders. You may qualify for fixed-rate refinancing or adjustable rate loans, depending on what the lender offers and your credit history.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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