February 27, 2019
Did you buy your first home with the help of a real estate agent but without the benefit of an FHA mortgage? When you compare online mortgage rates you will notice that the websites publishing these interest rates listing FHA loans with mortgage interest rates than conventional equivalents.
While it’s true that your FICO scores and other financial qualifications will play an important part in the rate you are offered, when it’s time to refinance you may find an advantage with FHA mortgages, and not just in the interest rate department.
FHA Refinance Loans For Non-FHA Mortgages
The FHA refinance loan options a non-FHA borrower has include cash-out refinancing, the equivalent of such a loan but with no cash back, and FHA rehabilitation mortgages known as FHA 203(k) rehab refinance loans.
All of these mortgages have similar credit qualifying requirements and all of them are for FHA or non-FHA mortgages alike.
Facts About FHA Refinance Loans
FHA refinance loans for non-FHA mortgages require a new appraisal and credit check. You should approach this new loan the same way you approached the original mortgage; examine your credit and make sure you have 12 months of on-time payments on your financial obligations before applying for the new mortgage.
You don’t have to use the same financial institution to refinance your mortgage; you are free to shop around for a new lender or use the same one if they are a participating FHA lender.
FHA mortgages including refinance loans require minimum FICO scores of 580 or higher for maximum financing. Your lender may require FICO scores higher than this based on the standards of that financial institution but your chances of getting maximum financing are much better if you examine your credit and work on improving your scores far in advance of the mortgage.
FHA refinance loans require occupancy-you are permitted to refinance a 1-4 unit home you are using as your primary residence. You will be required to certify you are going to occupy the home secured with an FHA mortgage as a condition of loan approval.
Participating FHA lenders will review your credit and employment history more than once during the loan application and closing process. Don’t assume that once you have had the initial credit review that your lender will not be updating that review. Any change in your employment/financial position or credit usage will be examined by the lender at some point between the first credit check and loan closing.
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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