July 5, 2023
Waiting to apply for a refinance loan makes sense if your current mortgage rate is lower than the rates offered now when shopping around for a lender.
But some people don’t get to choose the timing of their refinance loan application. Some fall behind on their home loans and use refinancing to get caught up.
Others may own a home that needs renovations or major improvements. Some other homeowners applied for an Adjustable Rate Mortgage and their introductory rate period is ending, leading to a series of rate adjustments many choose to avoid through refinancing.
Refinancing A Delinquent Mortgage
If you’re behind on your home loan payments and you reach out to your lender as soon as possible once you know you are struggling to pay, refinancing the loan could help you to get current on the mortgage if your lender agrees this is the right way to save your home.
Those who don’t get in touch with the lender right away may lose this option if too many payments are missed. Your lender’s standards in this area will be very important.
Using an FHA refinance option to get current is not the same approach as other options such as loan forbearance or loan modification. Your lender may offer you a variety of options, but the more payments you miss the fewer those options become.
Refinancing (versus loan forbearance, for example) is an option for those who know they can afford to keep paying the mortgage in the future.
Those who cannot may opt for a short sale, or other options the lender will discuss.
FHA Refinance Loans For Repairs Or Renovations
FHA Refinancing options include the FHA 203(k) Rehabilitation Loan, typically used to buy and renovate, or refinance and renovate a property that must be brought to state/local code and FHA minimum standards as a condition of loan approval.
FHA 203(k) Rehab loans are for owner-occupied properties and the typical FHA loan occupancy rules apply. FHA Rehab loans cannot be used for investment properties or houses you don’t plan to occupy as your home.
FHA Refinance Loans For Adjustable-Rate Mortgages
Borrowers with an adjustable-rate mortgage coming to the end of their introductory rate period have the option to refinance into an FHA mortgage.
Some consider the option (not ideal for all borrowers) of refinancing the ARM into another ARM loan with a new introductory rate.
If your main concern is protecting your monthly budget, doing this might make sense. If you are more concerned with saving as much money over the lifetime of the loan as possible you might want to consider a different approach than refinancing one ARM into another.
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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