March 2, 2022
If you have never applied for a refinance loan and are considering an FHA refinance, you may be unfamiliar with certain industry jargon and loan terms that will come up in the course of your loan application and during the approval process.
This article isn’t about what it takes to be approved for an FHA refinance loan, but it will make some aspects of the process a bit less mysterious.
Rate And Term Refinance
This is a type of FHA refinance option that features no cash back to the borrower, and uses all loan proceeds to pay off the original loan and cover closing costs. These loans can be used to refinance FHA or non-FHA mortgages.
FHA Simple Refinance
Like the Rate And Term, this refi option is meant as a no-cash out refinance that uses the loan proceeds to pay off the original mortgage and associated closing costs. The difference is, the loan rules for it specifically reference existing FHA loans.
FHA Cash-Out Refinance
A Cash-Out Refinance is described in the FHA Lender’s Handbook 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.”
Note that you can use the loan funds for any purpose, unlike an FHA 203(k) Rehabilitation Refinance which allows you to use cash from the loan for approved improvements and renovations to the home but does not allow unrestricted cash back.
FHA Streamline Refinance
An FHA Streamline Refinance is a no-cash-out refi loan specifically for existing FHA home loans only. You can apply for an FHA Streamline to lower your interest rate, lower your monthly payment, or get out of an adjustable-rate mortgage or FHA ARM loan. FHA Streamline Refinances come with options for no FHA-required appraisal or credit check.
FHA-To-FHA Refinance
This is the generic term for any refinance loan where an existing FHA mortgage is being refinanced by a new FHA mortgage.
FHA UFMIP Refund
Some FHA-to-FHA refinances may include a refund of the FHA Up Front Mortgage Insurance Premium, applied as a credit on the refinanced home loan. This is applicable when the FHA loan being refinanced is less than three years old.
Short Payoff
Some Rate-And-Term refinance loan transactions may have a mortgage amount that is “insufficient to extinguish the existing mortgage debt” and in such cases, the participating lender is permitted to approve the loan IF the current mortgage holder agrees to write off the amount that cannot be financed into the new FHA loan.
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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