FHA Loan Guide

An FHA (Federal Housing Administration) refinance can be a great option for people in various scenarios. There are two types of FHA refinancing loans: 1.) cash out refinancing and 2.) streamlined refinancing. In either scenario the home owner must have some equity in their home to be able to participate in such a plan. In addition, they must also use the home as their primary residence to qualify for the refinancing. Refinancing allows a person to benefit from the investment they made on their home allowing help in many different stages of people’s lives. Some use the FHA loans for cash out refinances in an effort to send their child to college, while others use the money for home repairs. Other examples of how the loan can benefit someone are special vacations, and even consolidating other bills.

FHA refinancing differs slightly from conventional refinancing loans. A person’s income and credit will be viewed more leniently or not at all with an FHA refinance. FHA refinance loans allow bad credit refinancing. FHA guidelines evaluate the “big picture” of the borrower’s credit history, so if there are isolated incidents of credit problems, they are often over looked. The credit qualifying guidelines are also much more relaxed with a FHA loan even with past bankruptcies and foreclosures.

The fees will also be lower with a FHA refinance loan including closing costs and private mortgage insurance (PMI). Closing costs are regulated with FHA loans so the bank cannot charge an excessive amount to the homeowner. When you are shopping FHA loans, always compare the fees in the disclosures when deciding on a FHA lender.

In cash out refinancing FHA refinance the home owner usually has a home that has increased in value. The refinance can take place if the home owner purchased the home a year or more ago. They are able to take out the refinance loan for more than what they owe on their home (up to 85% of the appraised value of the home plus closing costs), so they can pay back their original mortgage, end up with a new mortgage and have money to spare. The extra money is actually the equity that the homeowner has built up over the years in their home. After their equity has basically turned into money, they can use it for the needed use at the time.

With a FHA streamline refinancing loan the current mortgage’s interest rate can be cut without an appraisal in most cases and with minimal paperwork. Credit checks and job verifications are not looked at to qualify for these loans, but the existing loan on the property must be an FHA mortgage, the refinance must decrease the homeowner’s monthly interest payments and the loan has to be in good standing (no late payments within the last year). The streamlined refinance does not have the option of receiving cash. Its best purpose is to lower someone’s monthly expenses.

FHA Loan Articles