Fha Refinance
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by: ConnieSanders
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FHA mortgages have always been very good loans for the homebuyer. In today's market the FHA refinance programs offer maximum benefits to the homeowner that wants to lower payments or get out of an adjustable rate mortgage. FHA offers three types of refinance mortgage loans: Cash-Out, No Cash-Out, and Streamline Refinance.
A FHA streamline refinance can only be used to refinance a current FHA mortgage and it should lower payments. This program will not allow the borrower to receive any money back at closing. The main advantage to this mortgage is that the borrower, under certain conditions, does not have to requalify for the loan. The mortgage may also be done with or without an appraisal.
Allowed Conversions:
1. 30 yr fixed to 30 yr fixed: The new payment must be lower than the old payment.
2. 30 yr fixed to 15 yr fixed: New payment cannot be more than $50 higher. Note: 15 yr fixed to 30 yr fixed is not allowed.
3. Fixed Rate Mortgage to Adjustable Rate Mortgage: Owner occupied homes only
4. Adjustable Rate Mortgage to Fixed Rate Mortgage
5. Adjustable to Adjustable
6. 203k to 203b
FHA Streamline Refinance "Without" An Appraisal:
The new loan amount may not be more than the original loan amount, OR more than the current principle balance plus closing cost, ... Whichever is less. This only applies to owner occupied properties as non-owner occupied borrowers can only refinance the existing balance, and do not have the option of rolling in the closing costs.
The only credit verification required is mortgage payments. This can be done with 12 copies of cancelled checks, front and back. If cancelled checks are available, no in-file report is required unless the underwriter prefers that method to verify mortgage payments.
Streamline Refinance "With" An Appraisal:
A FHA streamline refinance with appraisal allows the homeowner to finance the closing costs, points, and prepaids if all fits within the loan to value limits. The loan amount may be the current principle plus closing costs, points and prepaids, OR, the appraised value x 97.75% (97.65%, or 97.15%, high or low cost state). Whichever is less!
IF the smallest of these two values is greater than the original mortgage balance credit verification is required.
Streamline Refinance - "Credit Qualifying":
The loan is calculated based on the previous formulas. Qualifying requires employment verification, credit report, and debt to income compliance. These loans are usually used when the mortgage payment will be higher, deletion of a borrower on the refinanced mortgage, or in assumptions involving due-on-sale clauses.
FHA Refinance, "No Cash Out":
This regular no-cash-out loan may be used to refinance a FHA mortgage, a VA mortgage, or a conventional mortgage and requires the borrower to fully qualify. Second mortgages may be included in the new loan if they are older than one year, if not you must prove that the funds were used solely to repair or rehabilitate the home. If not, paying off or including these loans would be considered a cash-out refinance.
This loan can be used to buy out the equity of a spouse provided it is documented in the divorce papers. This loan is still considered a no-cash-out because the equity is considered indebtedness.
IF the property was purchased less than a year ago and is not currently an FHA loan, the loan amount will be the appraised value plus closing cost, OR the original sales price plus closing cost. Whichever is less!
If the purchase was made more than a year ago and is not currently FHA, the loan amount would be calculated the same as a streamline refinance "with" an appraisal as explained above.
FHA Refinance "Cash Out":
This FHA loan can be used to refinance a FHA loan, a VA loan, or a Conventional loan. The advantage: Maximum loan to value is only 90% for Conventional loans but FHA allow 95% plus a portion of the closing costs.
About the Author
Connie Sanders owns a very educateative web site that was designed to educate the homeowner of fha underwriting guidelines. The knowledge aquired from her site will help them understand the loan process and prevent them from being misled. For more educateation go to: fha underwriting guidelines http://www.fha-underwritingunderwriters.com
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