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Homeowners enjoy the benefits of investing in their property
year after year. For some, there comes a time when that
investment can come in handy. Refinancing with an FHA loan can
prove to be an effective way to put that equity to work for you.
Sending a child to college, consolidating bills, taking a
much needed vacation, or making home improvements are some of
the ways homeowners tap into the equity they have accumulated in
their home to help with these expenses. Keep in mind that FHA
refinancing is only available to homeowners who are currently
using their home as their principal residence.
FHA offers several different options to homeowners who are
considering an FHA refinance mortgage:
FHA Refinance: Cash Out Refinancing
This refinancing option is especially beneficial to
homeowners whose property has increased in market value since
the home was purchased. A Cash Out Refinance allows homeowners
to refinance their existing mortgage by taking out another
mortgage for more than they currently owe, therefore repaying
their current mortgage and using the equity they have built up
in their home to take out another larger mortgage. This allows
the homeowner to access the equity they have built up in their
home and put it to good use where needed.
In order to get the most benefit from refinancing your
mortgage, it is often best to consider refinancing after you
have had time to build up a significant amount of equity in your
home. If the property was purchased more than one year prior to
the refinance, the homeowner can refinance the existing mortgage
for up to 85 percent of the appraised value plus the allowable
closing costs, which vary from state to state.
FHA Refinance: Streamlined Refinancing
This refinancing option is considered streamlined because it
allows you to reduce the interest rate on your current home loan
quickly and oftentimes without an appraisal. FHA Streamlined
Refinance also cuts down on the amount of paperwork that must be
completed by your lender saving you valuable time and money.
In order to qualify for a Streamlined Refinance, your
original home loan must be an FHA loan in good standing and the
refinance must lower your monthly interest payments. This type
of refinancing option reduces your monthly expenses by lowering
your payments but there is no option to receive cash back. This
works well for people who are in good financial standing with no
significant debt because it allows you a little extra money each
month that can be put to good use elsewhere.
FHA Streamline Loan Requirements
FHA Streamline refinancing helps lower your mortgage
payments on your existing FHA loan. Streamline refinancing is
one of the simplest loan applications you’ll ever fill out once
you understand the requirements of the FHA Streamline
application process.
- You must have a current FHA loan with no late payments or
delinquency notices for at least 12 months.
- Your refinancing should be accomplished to get lower
mortgage and interest payments.
- The refinancing process requires verification of
employment, but proof of income is not required.
- Your original mortgage must be at least six months old.
FHA Streamline Loans - Cash Back?
There is no cash-out option with FHA Streamline loans. Some
banks may advertise these loans as a way to get money to do home
improvements, save for college funds or other personal projects;
when you read more closely you will learn these references are
about the extra money you have left over because the Streamline
loan lowered your monthly bills. There’s no lump sum available
with a Streamline loan-the FHA’s stated purpose for this program
is to help homeowners with existing FHA loans lower their
monthly payments.
Closing Costs
Before you can get lower payments, you need to apply for the
FHA-insured Streamline loan, get approved for the loan (with a
no-credit check process), then close the deal.
As with your original FHA loan, you are required to pay
closing costs. These costs will be explained by your loan
officer and included in the terms of your loan. Your closing
costs and how they are paid may be affected depending on whether
you choose a “no appraisal” streamline loan or opt to have your
home re-appraised. No appraisal loans are good for those willing
to pay the closing costs up front and out-of-pocket.
You may also choose a “no cost” refinancing loan. What does
“no cost” mean? The borrower is charged a higher interest rate
to have closing costs included into the mortgage loan.
You can choose to have the closing costs built into your
loan, but you must have the property reappraised. You can only
roll the closing costs into your new FHA Streamline loan if
there’s enough equity in the property to cover the additional
amount.
FHA Streamline loans can get into lower mortgage payment and
better interest rates; your payments will drop and you’ll have
more money left over to save, pay off bills or invest. If you’ve
been paying on your current FHA mortgage for at least six
months, ask your loan officer how an FHA Streamline refinance
loan can lower your bills.
Apply now for an FHA Refinance loan.
Information source:
www.fha.com
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