FHA Refinance loans are used to refinance any non FHA loan to an FHA loan. If a borrower
has conventional mortgage they may be able to use the FHA refinance loan to refinance up
to a LTV of 95% provide that they are not getting any money at closing or paying off
anything other the the existing mortgage.
FHA Cash Out Refinances
FHA Cash-out refinances loans on properties owned more than one year
prior to the refinance are permitted on owner occupied principal residences only, and are
limited to 85% of the appraised value plus the allowable closing costs.
An FHA cash-out 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 home loan:
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 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 refinanced 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 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 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.
Whats needed to apply for an FHA Refinance Loan?
Generally, you will be asked for documentation to support your income,
liabilities, and funds to close. This documentation will establish your credibility as a
borrower, your ability to repay the FHA home loans and your willingness to repay the loan.
The following is a list of documents that most likely will be required by the lender to
process your FHA mortgage when a
For Regular Refinances including Non FHA loans to FHA loans, Cash Out Loans and
certain other transactions:
One full month's worth of paystubs showing Year to Date earnings
Last 2 years W-2's (salaried income)
For Self Employed Borrowers; Last 2 years tax returns with all schedules
(commission, dividend, rental income)
Copies of social security, pension, and/or retirement award letters (if
applicable)
Last two months bank statement for all accounts with all pages
Current statements for all investment accounts with all pages
Written explanation for any credit derogatories
Copy of Bankruptcy and discharge paperwork (if applicable)
Divorce decree and any settlement paperwork (if applicable)
Copy of your Drivers License and Social Security Cards.
Copy of you current Mortgage coupons or statements
Clear Termite Report
Copy of your Homeowners insurance
Copy of your Survey (only applies in survey states)
For FHA Streamline Refinances the following documentation may be
required:
Copy of your current Note
Copy of the First Two pages of your mortgage or Deed of Trust
Copy of your Drivers License and Social Security Card
Copy of your Homeowners insurance
Copy of your Survey (only applies in survey states)
Copy of you current Mortgage coupons or statements
Once receiving your documentation most lenders will handle acquiring other documentation
such as title reports, credit reports and appraisals if required. It is not uncommon for
the lender to have the borrower pay for the cost of the credit report and appraisal.
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