July 9, 2020
Since 1934, the Federal Housing Administration (FHA) has been helping people become successful homeowners. The FHA mortgage is insured by the Federal Government so that lenders can provide single family mortgages with flexible credit qualifying requirements and loan terms such as low-down payment, low interest rates and low closing costs. FHA mortgages are as popular as ever with homeowners and first-time homebuyers.
The FHA also offers great refinancing options, whether you’re an existing FHA borrower or not. If you’re thinking about a refi, an FHA refinance might be right for you. Check out these FHA refinance options and how you may qualify for each.
FHA Streamline Refinance
An FHA streamline refinance is for existing FHA loan borrowers to capitalize on low rates by refinancing quickly and efficiently, earning the name “streamline.” There’s a lot to love about this option. It has reduced credit and underwriting requirements, no income or employment verification, and no appraisal needed. Closing costs are not included in loan amount but may be offset by lender credits that are offered with this popular program.
Here are the eligibility requirements of an FHA streamline refinance:
FHA Simple Refinance
A Simple Refinance is a rate and term refinance of an existing FHA mortgage that allows you to include the closing costs in the Loan Amount. The Simple Refinance requires credit qualification, full documentation of income and employment and a home appraisal.
Program benefits include:
FHA Rate & Term Refinance
Rate and Term Refinance is a “no cash-out” refinance of an FHA mortgage where all proceeds are used to pay existing mortgage liens (on the property being refinanced) and costs associated with the new refinance transaction. This type of refinance can be used to buy out a title holder’s equity (for example, a divorce) or payoff recorded land contract.
Program benefits and requirements include:
Cash-Out for New and Existing FHA Borrowers
An FHA cash-out refinance is an option for both existing FHA loan borrowers and conventional loan borrowers looking to cash-out into an FHA loan. Here, you would refinance your existing loan and access the remaining equity in the form of cash. This type of refinance has more requirements.
Eligibility requirements of an FHA cash-out refinance include:
So, if you’re looking to get your hands on cash to go toward things like credit card debt, college tuition, home improvement projects, and more, an FHA cash-out refinance could be the answer.
Refinancing an FHA Loan into a Conventional Loan
If you’re an FHA borrower, you’re not limited to only refinancing into another FHA loan. As you pay down your mortgage (and if your home value has risen), you may have enough equity to refinance out of an FHA loan and into a conventional loan, like a fixed rate or adjustable rate mortgage (ARM). Though conventional loan rates are slighter higher, your mortgage insurance payments may be much less than those of an FHA loan. Plus, in some cases, FHA loan insurance is permanent, and that is not always the case for a conventional loan.
Refinancing a Conventional Loan into an FHA Loan
Refinancing into an FHA loan from a conventional one is a great option for those homeowners who would like to refi, but don’t have a stellar credit score to qualify for a conventional refinance. Your rate could be lower with an FHA loan, but you will have to pay mortgage insurance, potentially for the life of the loan.
Now that you’re familiar with some of the basic guidelines of an FHA refinance and what it can offer you, find the refinance option that’s right for you. Get in touch with NewRez’s team of mortgage experts to learn more.