Topic for Today’s Conversation – FHA Refinance Options

Thinking back to a previous conversation that I had, no one should have to be limited in options related to solving an issue; especially one that can be life-changing. Something such as asking yourself, “What should I have for lunch a yogurt or a sandwich today?”  While it may have a minor impact on how a person may feel that day, it usually would not have a huge impact on your life. Now when a homeowner is in need of financial assistance and is told that the only way to resolve the problem is to refinance their home, a decision has to be made that will have an impact on their life. After all, the process of getting a new mortgage to replace the original one is not a simple process if you want it done successfully. Also, rushing into doing this without first seeing if getting a new loan is financially possible can make your current problem worse.   Luckily, there are options available when deciding to refinance your home in order to fix the problem on hand.

Before going over choices that involve getting a new loan as a whole, the first thing to do is to decide if you want a conventional refinance or a non-conventional loan. The latter choice, which is a government backed refinance, has its own requirements for approval as well as being somewhat easier to qualify for.  So, our conversation for today is to look types of FHA refinance options available as well as finding one that will provide a new mortgage that will benefit the applicant the most.


What Kind of FHA Refinance Options are Available to Applicants?

FHA refinanceWhen looking at the kinds of FHA refinance options available to an applicant, it is important to realize that qualification requirements vary depending on what you hope to accomplish.  This means that the borrower should know what goal they have in mind so that it will be easier to see which option will work out the best.  The choices available are all federally backed loans and are known as a streamline refinance, a cash-out refinance and a replacement loan.  One thing to keep in mind is that the first two that I mentioned require that the original mortgage obtained was backed by the government.  The third is different being that the current mortgage was purchased from a non-government lender.  Despite this, you will notice that while the types of loans offered are different, the requirements are sometimes the same.


  • With a streamline refinance, it is known as the easiest way to get approval for since there is only a small amount of paperwork to be filed. The reason for this is because the application for the refinance is generally the same information that was submitted with the original administrative mortgage. This includes appraisal and inspections, credit reports as well as bank and income statements. The main requirements for this loan are that you are still employed and that the new government backed loan monthly payments are smaller than your current loan.  Are you interested in a refinance and have an unfavorable credit report? Relax. The new lender goes by the credit history when the loan was first purchased.  If the goal of this option meets yours, then this is for you.  If not, let’s look at the next choice for refinancing.
  • Next up we have the cash-out refinance loan. One requirement for this is the same as a streamline mortgage– the mortgagee must have a current mortgage backed by the government.  With that said, there are some differences in order to be approved such as the home being refinanced must have sufficient equity that can be withdrawn from it.  This also means in order to determine the current market value of the home; the homeowner has to pay to have the property appraised.  Since the requirements are focusing on all information being up-to-date, the applicant’s current credit score comes into play.  As long as your credit score is 580 or above, at least 3.5 percent of equity needs to be present in the home.  However, if your score is under 580, you are required to have at least 10 percent equity present.  As far as current monthly income is concerned, verification has to be made that the new monthly payments on the new mortgage is less than 29 percent of their income.  Before deciding on which refinance to apply for, there is still another option to consider.
  • The third choice to is known as a federally backed replacement loan.  Those who currently have a conventional loan have the option to seek approval for a loan that is federally backed.  Yet, it is important to understand that the income, credit and down payment requirements in order to get approved are the same as a cash-out administrative backed mortgage.  Individuals who are new to applying for an administrative backed loan might have difficulty with meeting the requirements, so you need to make sure they fully understand the process before seeking approval.


Listen to the Savvy Voice Within

refinanceOne key characteristic a homeowner needs to have is patience.  As much as one may wish to get through the process of refinancing in a quick manner, that can usually lead in purchasing a new mortgage that eventually prove more harmful than good.  Apart from taking the time to understand the requirements of each option available, it is also important to be savvy when looking at acquiring a new loan.  This means breaking down the pros and cons of each loan and seeing the potential within each option.  The option that has the most potential should be the one to pursue– as long as the requirements can be met.  By being able to recognize the so-called diamond in the rough, it should lead to a successful refinance instead of a bad one.


Know your Requirements

Though there are other choices out there in searching for a beneficial new mortgage, this conversation focused on some of the FHA refinance options available to a mortgagee. As stated earlier, we discussed several choices that are available to homeowners seeking to get a new mortgage to replace their current one.  When breaking down requirements as well as who can benefit the most from each new loan, an individual can determine which avenue to take. My advice to every applicant looking to acquire a new mortgage is to know first what the reason for the new loan is. Whether it is to reduce interest rates or cashing in the equity of your home, know and understand why you need to refinance. This will help simplify which type of mortgage to pursue. I hope this was informative and I wish you luck in getting the government backed new mortgage that will benefit you the most.