June 15, 2015
Is now the right time to refinance your mortgage with an FHA loan? Many are considering their options, but if you don’t know the possibilities offered by an FHA refinance loan, now is a good time to get caught up on what’s available for owner-occupied single family home loans.
FHA single-family home loan refinancing is available for both existing FHA loans and non-FHA mortgages. Your current loan can be an FHA, VA, conventional, or any other type of home loan that meets FHA program requirements for refinancing. Borrowers applying for any type of single family FHA home loan must be owner-occupiers of the property securing the new loan.
For existing FHA loans, there is an option for cash-out (appraisal and new credit check required), no cash out (an appraisal and/or credit check may be required depending on the circumstances and the requirements of your participating FHA lender) and also the Streamline Refinance loan option which features no FHA-required credit check or appraisal except in certain cases. Your lender may require a new appraisal and/or credit check but for FHA Streamline loans the lender has the option to approve the loan without either in most cases.
FHA-to-FHA mortgage loan refinancing includes the option to have an Energy Efficient Mortgage (EEM) package added to the amount of the loan. Discuss this option with your loan officer to see what kinds of energy efficient improvements (which must be FHA approved and will require further work with your lender) might be possible.
Non-FHA refinance loans work in similar ways. Borrowers refinancing into FHA mortgages from VA or conventional loans still have the EEM option, as well as cash-out and no cash-out refinancing. The FHA Streamline refinance loan is not available to non-FHA mortgage loans, however. FHA Streamline loans use the existing application data from the borrower’s first FHA loan transaction to process the new mortgage. That information isn’t available with a non-FHA loan so Streamline options don’t apply in Non-FHA to FHA loans.
Appraisal requirements are also the same–FHA loans require you to have a new appraisal for a cash out loan and the appraisal cannot be used from any prior transaction where the loan has been closed. The new appraisal will help establish the fair market value of the home for the purposes of determining the FHA loan limit on the refinance. The Loan-To-Value ratio on FHA refinance loans may depend on several factors including the type of refinance, whether there are subordinate liens, etc.
Speak to a loan officer about your refinance loan needs, and remember that you are not required to use your existing financial institution for a refinance loan–it pays to shop around!
Do you have questions about FHA home 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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