June 11, 2015
Are you thinking about refinancing a home loan? There are some facts about FHA refinancing loans you should know before you start shopping around for a lender. And that’s an activity more than one borrower doesn’t think about when first considering a refinance. Did you know you don’t have to stay with your original financial institution in order to refinance a mortgage? That’s our first tip about home loan refinancing:
Shop Around For A Lender
Your current lender may or may not offer you the most competitive refinance loan interest rates and/or terms. Do you know what other rates are offered elsewhere? You do not have to use the original lender to refinance a home loan with an FHA mortgage. You will need to find a participating FHA lender, but it doesn’t have to be your current one.
Consider Your Options
Borrowers in an adjustable rate mortgage will find a distinct advantage to refinancing into an FHA fixed-rate mortgage loan, but others may consider refinancing into another adjustable rate mortgage. This is possible with an FHA refinance loan–discuss the terms of a new FHA ARM loan with your loan officer including the “teaser rate”, restrictions on the amount the loan can change in a calendar year, etc. You may be surprised at the options you have with an FHA refinance compared to a conventional loan.
For FHA-to-FHA refinancing, a Streamline Refinance loan option is available that may include no FHA-required credit check or appraisal. The lender may require one or both, but basic FHA loan requirements don’t include an FHA-mandated appraisal/credit check. Borrowers may find that a Streamline Refinance loan option can help them save money over the lifetime of the loan thanks to reduced interest rates and/or monthly payments.
Conventional Mortgages Are OK
You don’t have to be in an existing FHA loan in order to refinance with an FHA loan. You can refinance from conventional to FHA, VA-to-FHA, or FHA-to-FHA. FHA refinance loans for non-FHA mortgages don’t include a Streamline Refinance option, but cash-out and no cash-out refinance loans are definitely possible.
Energy Efficient Mortgage Loan Options
FHA refinance loans include the option to include extra funds for approved energy efficient improvements to the home. This is possible for all types of FHA refinancing, not just FHA-to-FHA loans. Ask your loan officer about the FHA Energy Efficient Mortgage (EEM) option and what it takes to include it in the loan. Note that in such cases the original loan may be processed without the EEM depending on circumstances, but the EEM would be added to the loan at a later time in the loan approval process.
FHA EEMs can increase the amount of the monthly mortgage payment depending on circumstances. Speak to your lender about how this affects your chosen refinance loan option, especially if you are thinking about a Streamline Refinance mortgage loan.
Do you have questions about FHA refinance loans? Ask us in the comments section.
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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