November 22, 2013
Borrowers interested in a non-streamline, credit-qualifying FHA refinance loan that features no cash back to the borrower will be interested in knowing some of the basics of this option including the maximum mortgage loan possible and details of the Up Front Mortgage Insurance Premium requirements.
The rules that govern these types of refinancing loans are found in HUD 4155.1 in Chapter Three. Borrowers should note that there is no fixed single dollar amount limit for an FHA loan–your loan amount is determined by the fair market value of the home (which is determined by an appraisal) and your loan amount can be affected by the FHA loan guaranty limits in your county, plus any approved add-ons to the mortgage.
When it comes to percentages, however, there are specific numbers. According to Chapter Three:
“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.”
FHA loan rules say the total “first mortgage” of your FHA loan “is limited to 100% of the appraised value, including any financed upfront mortgage insurance premium (UFMIP).”
At this stage many borrowers want to know if UFMIP is required on the FHA refinance loan. Chapter Three reminds borrowers and lenders, “Most FHA mortgages require payment of an UFMIP.” The maximum loan amounts described in the FHA loan rulebook do not include the amount of the UFMIP, and Chapter Three addresses the obvious question raised by this:
“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.”
Finally, on an FHA refinance loan where an appraisal is required, the borrower must make any corrections or other alterations recommended by the FHA appraiser as a condition of loan approval.
Do you have questions about FHA refinancing 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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