August 9, 2017
How much can I borrow with an FHA refinance loan? There are many reasons why a borrower might need to know early in the planning stages how much might be allowed, and knowing the FHA loan rules in this area can definitely help save time before you apply for the loan. Knowing what kind of refinance loan you might need is a big help in answering the question.
Why? Because the actual dollar amount for some FHA refi loans may vary for the same property depending on circumstances. The amount of an FHA rehab loan, for example, will be higher since there are laborers and materials to be paid for, inspections, etc.
The same home that gets an FHA Streamline Refinance loan instead might have a lower dollar amount depending on circumstances if the borrower doesn’t commit to any add-ons to the loan amount.
So what is the answer to the basic question? There are multiple factors that can affect the loan amount.
In general according to the FHA loan handbook, HUD 4000.1, “A Mortgage that is to be insured by FHA cannot exceed the Nationwide Mortgage Limits, the nationwide area mortgage limit, or the maximum Loan-to-Value (LTV) ratio. The maximum LTV ratios vary depending upon the type of Borrower, type of transaction (purchase or refinance), program type, and stage of construction.”
Furthermore, “Under most programs, the maximum Mortgage is the lesser of the Nationwide Mortgage Limit for the area, or a percentage of the Adjusted Value”.
The adjusted value of the home is an important detail. How does your loan officer arrive at the adjusted value? “For Properties acquired by the Borrower within 12 months of the case number assignment date, the Adjusted Value is the lesser of…the Borrower’s purchase price, plus any documented improvements made subsequent to the purchase; or the Property Value.”
For homes purchased within 12 months of the case number assignment, “by inheritance or through a gift from a Family Member may utilize the calculation of Adjusted Value for properties purchased 12 months or greater” and for homes purchased by the borrower “greater than or equal to 12 months prior to the case number assignment date, the Adjusted Value is the Property Value”.
Borrowers may, depending on the transaction and lender standards, be required to get a new appraisal for a refinance loan-especially if there is cash back to the borrower via an FHA Cash-Out Refinance loan.
FHA Streamline Refi loans do not usually feature an FHA-required new appraisal, but the lender may require one anyway depending on circumstances.
Naturally the actual dollar amount of your refinance loan will vary depending on the adjusted value of the home, but other factors that can affect your transaction include market conditions, the willingness of your lender to offer the type of FHA refinancing you seek, and your credit scores.
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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