November 1, 2013
There are several different types of FHA refinance loans. One is known as an FHA Streamline Refinance, which is for borrowers with existing FHA mortgages. Another is the FHA’s cash-out refinancing option, and there’s also a no cash-out refinance loan where proceeds of the loan are used to pay closing costs and other expenses related to the new loan.
Streamline loans can be offered with or without an appraisal, while cash-out and no cash-out loans both require one. The term of these refinancing loans depends on the type of loan. The FHA loan rules for refinancing loans are found in HUD 4155.1, which says, “The maximum term of any refinance with an appraisal is 30 years. The maximum term of a streamline refinance without an appraisal is limited to the lesser of the remaining term of the existing mortgage, plus 12 years, or 30 years.”
Borrowers who have purchased recently and are already looking to refinance may wonder if the existing appraisal (if still valid) could be used for the new loan instead of having to pay for a new appraisal. But FHA loan rules say, “FHA appraisals on existing properties are valid for six months. However, appraisals cannot be reused
• during the six month validity period once the mortgage for which the appraisal was ordered has closed, or
• for a subsequent refinance, even if six months have not passed.
A new appraisal is required for each refinance transaction requiring an appraisal.”
Borrowers hoping to refinance loans on mobile homes, manufactured homes or similar properties should take note of the FHA loan rules for these types of loans, as described in HUD 4155.1 Chapter Three:
“For a transaction involving a manufactured home to be considered a refinance, the manufactured home must
- have acceptable property status
- be complete, and
- have been permanently erected on a site for more than one year (12 months) prior to the date of the application for mortgage insurance. Standard maximum mortgage calculations apply.”
Regardless of the type of financing, FHA loan rules say the loan to be refinanced must be current (or made current) as a condition of loan approval. “The borrower must be current on the loan being refinanced for the month due prior to the month in which he/she closes the refinancing, and for the month in which he/she closes.” The rules don’t permit borrowers to skip payments on the old mortgage.
For more information on home loan refinancing with an FHA mortgage, speak to a loan officer about your needs and financial goals.
Do you have questions about FHA loans? Ask us in the comments section. You can apply or get pre-approved for an FHA mortgage or refinance loan at www.FHA.com (a private company and not a government agency).
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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