October 3, 2012
Refinancing an FHA mortgage is similar to refinance loan on other types of mortgages such as conventional loans or VA loans.
Naturally the FHA has its own list of requirements and regulations that govern refinance loans; do you know the basics as well as you should? If you’re considering an application for an FHA refinance, here are a few general things you should know about going into the process.
In the FHA loan rulebook under the section, “Purpose of a Refinance Transaction” we learn, ” A refinance transaction is used to pay off an existing real estate debt with the proceeds of a new mortgage;
–for borrower(s) with legal title, and
–on the same property”.
The rules also state that an FHA borrower is “eligible to refinance the loan, as long as he/she has legal title, even if he/she was not originally on the loan.” That’s important to know in cases where a home was inherited or otherwise had ownership transferred in a way permitted under FHA loan rules.
How much can an FHA borrower refinance the loan for? According to the section titled, Maximum Percentage of Financing for a Refinance” we learn that there is no set dollar amount for FHA refinances. Instead, “The maximum percentage of financing for a refinance transaction is governed by:
–the occupancy status of the property
–the use of the loan proceeds, and
–how and when the property was purchased”.
The rule book adds that in general, an FHA refinance loan “may never exceed the statutory limit, except by the amount of any new upfront mortgage insurance premium (UFMIP). However, the maximum mortgage may exceed the statutory limit on certain specialty products.” Contact a participating FHA lender to learn which of those specialty products might be available to you–not all lenders may offer them.
Under “Types Of Refinances” we learn;
“FHA insures several different types of refinance transactions, including
–streamline refinances of existing FHA-insured mortgages made with or without appraisals
–no cash out refinances (rate and term) of conventional and FHA-insured mortgages, where all proceeds are used to pay existing liens and costs associated with the transactions
and
–cash out refinances.”
Do you have questions about the FHA loan process? 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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