Home owners with or without FHA
home loan may
use the FHA Refinance Loan,
the cash out
FHA refinance loan, or the FHA Streamline refinance
program to consolidate their bills or take cash out of their
property or just lower their interest rate and payments.
FHA refinance loans on properties owned more than one year prior to the
FHA refinance are permitted on owner occupied principal residences only, and are limited to
85% of the appraised value up to a base loan amount of
$417,000. If the base loan amount (loan amount prior to
adding the MIP premium) is greater than $417,000, then the
maximum loan to value is limited to 85% and will require a
A cash-out FHA refinance loan is when a borrower refinances their current mortgage for more than they owe in order to pull out the built up equity that has accrued in the home. The amount a home owner can borrower is limited by the value of the property compared to the loan amount (otherwise known as the loan-to-value or LTV).
The following are basic requirements of a cash-out FHA refinance
Borrowers who are delinquent or in arrears under the
terms and conditions of their current mortgage(s) are not eligible for a
cash-out FHA refinance.
The subject property must have been owned by the borrower as his or
her principal residence for at least 12 months preceding the date of
the loan application. If the borrower has not owned the the property for
a minimum of 12 months, the FHA refinanced insured new mortgage is capped at 85 percent
LTV. In such cases, the FHA mortgage amount must be calculated using the
lesser of the appraised value or the original sales price of the property
multiplied by 85%. However, a sales price
need not be considered if the property was acquired as the result of inheritance
and is or will become the heir’s principal residence
If said property is encumbered by a mortgage, the
borrower must have made all of his/her mortgage payments within the month due
for the previous 12 months, i.e., no payment may have been more than 30 days
late and is current for the month due.
Applies to owner occupied properties only.
The property that is security for the FHA refinance mortgage
must be a 1- or 2-unit dwelling.
Loan amounts may not exceed the maximum loan limits for the area.
Subordinate financing may remain in place, but subordinate to the
FHA refinanced insured first mortgage, regardless of the total indebtedness or
combined loan-to-value ratio, provided the homeowner qualifies for
making scheduled payments on all liens.
All borrowers must credit qualify.
Any co-borrower or co-signer being added to the note must be an
occupant of the property. Non-occupant owners may not be added in
order to meet FHA's credit underwriting guidelines for the mortgage.
If a homeowner is
pursuing a cash-out FHA refinance and the loan balance exclusive of FHA’s upfront
mortgage insurance premium will exceed $417,000, the loan-to-value may not
exceed 85 percent of the appraiser’s estimate of value.
For those that currently have a FHA home loan and do not
qualify for a regular FHA refinance or
want to take any cash out or consolidate any bills they may
want to consider a FHA
Streamline Refinance Home Loan.