October 13, 2016
FHA loans aren’t just for new purchases. You can also apply for an FHA refinance loan for an existing FHA mortgage, a conventional loan, or other types of mortgages depending on the type of refinancing you need.
HUD 4000.1 describes the rules for FHA refinance loans, including a basic list of all the types of refinancing available and what they are meant to do for the borrower:
-No cash-out refinances of FHA-insured and non FHA-insured Mortgages are designed to pay existing liens. These include: Rate and Term refinance, Simple Refinance, and Streamline Refinance.
-Cash-out refinances are designed to pull equity out of the Property.
-Refinances of non FHA-insured Mortgages are available for qualified Borrowers in negative equity positions (Short Refi).
-Refinances for rehabilitation or repair (Section 203(k)).
That information is found on page 126, which also adds the following requirements:
“In order to obtain FHA-insured financing, all Borrowers must meet the eligibility criteria in this section. A party who has a financial interest in the mortgage transaction, such as the seller, builder or real estate agent, may not be a co-Borrower or a Cosigner. Exceptions may be granted when the party with the financial interest is a Family Member.”
FHA refinance loans have an occupancy requirement the same as new purchase loans. The rules for FHA mortgages in general, where occupancy is concerned, is as follows from HUD 4000.1:
“To be eligible, all occupying and non-occupying Borrowers and co-Borrowers must take title to the Property in their own name or a Living Trust at settlement, be obligated on the Note or credit instrument, and sign all security instruments. In community property states, the Borrowers spouse is not required to be a Borrower or a Cosigner. However, the Mortgage must be executed by all parties necessary to make the lien valid and enforceable under State Law.”
To refinance, borrowers generally must credit qualify, but where FHA Streamline Refinancing is concerned, there is no FHA required credit check or appraisal needed. The lender may require these anyway, but is free to do otherwise. FHA Streamline Refinance loans offer no cash back to the borrower and are intended to lower monthly mortgage payments, interest rates, or both. Any loan featuring cash back to the borrower, such as FHA Cash-Out refinancing, will require a credit check and appraisal.
Talk to a loan officer about refinancing your existing FHA mortgage or non-FHA home loan for more information.
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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