If you want to refinance your home mortgage using an FHA refinancing loan, it's important to understand a few facts at the start of the application process. FHA refinancing is different than the FHA HOPE for Homeowners refinancing program.
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Terms for FHA Refinancing
If you want to refinance your home mortgage using an FHA refinancing loan, it's important to understand a few facts at the start of the application process. FHA refinancing is different than the FHA HOPE for Homeowners refinancing program. HOPE was created to protect people from going into default or foreclosure and has terms you won't find in FHA refinancing or FHA Streamline loans.
FHA refinancing loans can be taken out to lower your monthly payments, avoid going into default or foreclosure, and even help you pay for home improvements. The different types of FHA refinance loans all feature their own unique set of requirements and terms. You can choose from one of several different FHA insured loan programs:
Cash-out FHA refinancing up to 85% of the home's appraised value
Cash-out FHA refinancing for up to 95% of the appraised value
No cash-out FHA refinancing
Streamline FHA refinancing
In the case of both cash-out FHA refinance loan options, you're required to own the home for at least a year before applying.
HOW MUCH CAN I BORROW?
Lending limits for cash-out FHA refinancing loans may vary depending on whether you apply for. You'll need to know how much your home's appraised value is and calculate wither 85% or 95% of that appraised value. For no cash-out refinancing loans, the calculations become a bit more complex.
For "non-streamlined" FHA refinancing, your maximum loan amount may be determined by one of two calculations. One is made with the home's maximum loan-to-value percentage multiplied by the home's appraised value.
A second calculation involves the total of the original lien, any second mortgages or "junior liens" over one year old, plus closing costs and other expenses. The amount you qualify for will be the calculation which has the lowest amount.
FHA Streamline refinancing loans are designed to serve those with existing FHA loans. With Streamline FHA refinancing loans, no cash given to the buyer, but the calculations of the loan amounts are similar to non-streamlined FHA refinancing. there are two Streamline refinancing loans. One requires a new appraisal of the home. Did you know closing costs can be built into the cost of the loan rather than having the buyer pay them out of pocket? If the home has enough equity to cover the additional expense, the buyer can include the closing costs into the loan amount.
The no-appraisal FHA Streamline loan is limited to the amount of the original FHA home loan only. The buyer must make other arrangements to cover the closing costs rather than building them into the terms of the new FHA refinancing loan.
For non-Streamline FHA refinancing, pre-qualify in the same way you did for your original FHA home loan. Streamline FHA refinancing does not require a new credit check in most cases unless your bank has a policy requiring one. You are required to be current on your mortgage payments but there are other considerations. when applying for 95% cash-out refinancing, you are also required to have a record of on-time payments for the entire previous year.
One area that confuses some homeowners seeking FHA refinancing is the down payment issue. There is a minimum down payment requirement of 3.5% for all FHA mortgages issued after 1 January 2009. However, recent guidelines issued from the FHA states this requirement does not apply to FHA refinance mortgages --there is no down payment required to refinance. You will still have to pay closing costs.
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