When the economy crumbled and the landslide came crashing down it left homeowners between a rock and a hard place. Homeowners had no idea how they would dig themselves out from under their mortgage loans but as the time passes and the smoke clears it has become clear that there is help. An FHA refinance can be a source of salvation for those who are in dire need of help or want to take advantage of lower interest rates. There are plenty of options out there to help homeowners get out of the rock and the hard place they were placed in when the economy crashed and the Federal Housing Administration has worked out more than one option to help homeowners out of the various situations that have befallen them.
What Options Wait For A Borrower Under The FHA Refinance Umbrella?
Homeowners that have fallen on hard times have the same problem of needing help to manage their current loans.Though they all need help the situations are not all exactly the same and may need different FHA refinance solutions to help. For those who currently have a FHA loan the option of a streamline refinance is the option that would be the easiest and most efficient of all the options that are available. The lenders would essentially use the information they already have on file to help the homeowner obtain a new affordable rate on their loan. The guidelines to be eligible for this option are fairly easy to manage since the lenders do not require a credit check, job verification or the debt ratio requirements to be met. Though this process is very straightforward and fairly painless the lenders do require that the current FHA loan be in good standing by showing three months of good payment history.
Another option for those who have an FHA loan is the cash-out refinance. This option allows a homeowner to take advantage of the equity they have already put in their home. The more equity a owner has in the property the better so it is suggested that the owner have at least been paying on the loan for more than a year prior to the FHA refinance. If it has been more than a year then the homeowner is eligible to refinance the current mortgage up to ninety-five percent of the appraised value of the home plus the allowable closing cost. The allowable closing cost can vary depending on the state in which the home was purchased so due the diligence of finding out what that may be in that particular state.
What Are FHA Lenders Looking For As It Pertains To The Cash-Out option?
There are a couple of tiers that a homeowner can fall into when going the route of a cash-out refinance. Depending on the tier that a homeowner falls into will determine how much they can receive on the refinance. Tier one requires that the property be a one or two unit dwelling that the borrower not only owns but has personally lived in for at least twelve months prior to the application. If there happens to be a cosigner on the loan then the FHA lender will require that they must reside in the home at the time of the refinance. Another stipulation for this tier is that there can be no delinquent loans on the property. The FHA defines this as no payments made thirty days past the due date for twelve consecutive months. If there is a second mortgage or lien on the property that has lower legal priority than the first it can stay on the property after the refinance but the FHA lender will require the borrower show that they can make payments on the second mortgage in full and on time. If these requirements are met then the borrower is eligible for a FHA refinance up to ninety-five percent of the appraised value of the property. Under the second tier the property can be a single unit dwelling or a multifamily home with up to four units. As in the first tier the owner must have owned the property for at least twelve months and live in the home at the time the application is submitted. If the borrower meets these requirements then they are eligible for an FHA refinance of eighty-five percent of the appraised value of the property. If the homeowner falls into this tier and has owned the property for less than twelve months then the owner will be eligible for less than eighty-five percent of the appraised value of the property or eighty-five percent of the purchase price. No matter the tier a homeowner falls under this option has the ability to help get a borrower out of tough situation.
Since the economy fell through homeowners have had a hard time maintaining their current mortgage loans. As the economy rebuilds, the Housing Administration has not only provided tools to help borrowers dig out of the rubble of a fallen economy through FHA refinancing but also provides the necessary help for people to rebuild their lives through options like streamline refinancing and the cash-out refinance. As a reminder, make sure to check the rules and regulations because they are subject to change.
Here are some other FHA refinance options.