06/11/2010 If you're interested in pursuing FHA loan refinancing, it's important to understand the guidelines. Like other refinancing programs, FHA guidelines allow you to refinance into a shorter loan term, for example from 30 years to 15, and for other reasons.
Some of the benefits of the refinance process include the ability to obtain cash to cover the cost of an education or bill consolidation or to make improvements to your home. How you'll benefit depends on the refinance program for which you qualify. Some refinancing programs may include closing costs. If they do, program guidelines may allow you to roll those costs into your new mortgage.
FHA's Streamline Refinancing
FHA Streamline refinancing is one of the refinance programs offered by the FHA that lets homeowners refinance into a lower interest rate. The program is called "Streamline" because it's fast. Minimal paperwork and the ability to skip the appraisal process help you reap the financial benefits of refinancing sooner. If you already have an FHA mortgage, you may qualify for Streamline Refinancing. However, the original mortgage has to be in good standing. Only one 30-day late payment in the past 12 months is allowed. The mortgaged property has to be a primary residence that you have owned for at least six months. Also, after you refinance, you must end up with a lower rate of interest than you had originally.
Conventional mortgage holders may be able to take advantage of the FHA Streamline process and obtain the lowest interest rates. However, they'll be required to undergo a thorough application process including verifying employment, checking credit, analyzing debt-to-income, and anything else that's required.
Although an home appraisal is optional, understand that if you choose to skip it, you'll have to pay closing costs up front. You won't have the option to role the costs into your new mortgage. Finally, you won't get any money with a Streamline Refinance. You will however, get a lower interest rate; something that benefits those with little or no debt. FHA's Cash Out option
If you have equity in your home, you may qualify for the FHA's cash out refinancing program. With this option you can refinance an amount that's greater than the amount currently owed on your home. You use the new mortgage to pay off the original mortgage and the cash overage is yours to use any way you want.
