December 7, 2017
FHA home loan refinance options in 2018 include a variety of terms. Are you a first-time refinance loan applicant and feeling a bit confused by all the jargon? Here is an explanation of the options you have to refinance your home loan in 2018 using an FHA refi loan.
FHA Cash-Out Refinances Defined
What is a cash-out refinance loan? According to the FHA loan handbook, HUD 4000.1, cash out refinancing is described as, “a refinance of any Mortgage or a withdrawal of equity where no Mortgage currently exists, in which the mortgage proceeds are not limited to specific purposes”.
You read that correctly-some participating FHA lenders may approve an FHA cash-out refinance loan on a property that has no existing mortgage, for the purpose of pulling equity out of the home in the form of cash.
Talk to a participating loan officer to learn more about this option.
FHA No-Cash Out Refinance Loans
HUD 4000.1 says of FHA no-cash out transactions that this is a “refinance of any Mortgage in which the mortgage proceeds are limited to the purpose of extinguishing the existing debt and costs associated with the transaction.”
Participating FHA lenders may offer three types of no cash-out refinances:
–The “Rate & Term” Refinance, where all loan proceeds “are used to pay existing mortgage liens on the subject Property and costs associated with the transaction”. Rate and Term refinancing can be used on any mortgage.
This type of refinancing is not restricted to existing FHA loans only, unlike the other options listed below.
–The FHA Simple Refinance, which is basically a no cash-out refinance of an existing FHA-insured Mortgage in which “all proceeds are used to pay the existing FHA-insured mortgage lien on the subject Property and costs associated with the transaction” according to HUD 4000.1.
Note that these no-cash out refi loans are for existing FHA mortgages only.
–FHA Streamline Refinance loans allow the refinance of an existing FHA-insured mortgage, “requiring limited Borrower credit documentation and underwriting. There are two different streamline refinance loans; credit qualifying and non-credit qualifying.
As with simple refinance loans, the FHA Streamline Refinance option is only for existing FHA mortgage loans.
Additional lender standards and requirements may apply for any of these FHA refinance loan options. Talk to a participating lender about the right refi loan choices for you.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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