August 1, 2013
FHA refinance loans include an option described in the FHA loan rules as a No Cash-Out Refinancing Loan With An Appraisal. These loans have rules that govern all aspects of the loan from the amount of the maximum mortgage amount (see below) and how much a borrower can receive in cash at the closing of the loan (the borrower may not receive cash back in excess of $500 at closing according to HUD 4155.1 Chapter Three Section B).
How much is the maximum FHA loan amount for no cash-out refinancing loans? According to HUD 4155.1, “The maximum mortgage for a no cash out refinance with an appraisal (credit qualifying) is the lesser of the 97.75% Loan-To-Value (LTV) factor applied to the appraised value of the property, or existing debt.”
Additionally, “The total FHA first mortgage is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP). Most FHA mortgages require payment of an UFMIP. The statutory loan amounts and LTV limits described in this handbook do not include the UFMIP . Generally, the maximum mortgage may never exceed the statutory limit, except by the amount of any new UFMIP. However, the maximum mortgage may exceed the statutory limit on certain specialty products.”
As with new purchase FHA home loans, FHA loan rules state that the borrower must “comply with any appraisal requirements, including repairs, before the mortgage is eligible for insurance endorsement.”
FHA loan rules require the borrower to be current on the mortgage for this type of refinancing. According to HUD 4155.1 Chapter Three, “The existing first mortgage must be current for the month due and may include
- − the interest charged by the servicing lender when the payoff will not likely be received on the first day of the month (as is typically assessed on FHA-insured mortgages)
- − any prepayment penalties assessed on a conventional mortgage or an FHA Title I loan
- − late charges, and
- − escrow shortages, and
- may not include delinquent interest.”
There’s a special provision in the rules for FHA refinancing loans with no cash out–a rule directed specifically at borrowers who are refinancing in order to “buy out an ex-spouse’s or other coborrower’s equity”. In such cases, FHA loan rules state the specified equity to be paid is to be “considered property-related indebtedness, and eligible to be included in the new mortgage calculation.”
In order for a borrower to qualify for this, “the divorce decree, settlement agreement, or other bona fide equity agreement must be provided to document the equity awarded to the ex-spouse or coborrower.”
For more information on this type of FHA refinancing, contact a loan officer to get started, or pre-qualify for a loan.
Do you have questions about FHA refinancing? 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.
Browse by Date: