An FHA loan is a type of mortgage that is insured by the Federal Housing Administration. Are you thinking of refinancing your FHA loan? Low interest rates can reduce your monthly payments as well as meet other financial goals. You will also receive cash to repay loans at high interest rates.
However, refinancing has its advantages and disadvantages. If you want to enjoy its benefits, you must qualify for FHA refinancing. Remember that your home must be your primary residence in order to qualify for FHA refinancing.
FHA Cash-Out Refinance
FHA Cash-Out Refinance is beneficial for homeowners whose market value has increased over time. The advantage of this loan is that the loan pays the homeowner to refinance the existing loan which amounts more than the existing mortgage.
To qualify for this loan, the homeowner must have 20% equity in the home. This loan is very effective and beneficial for those whose property is worth more. There are certain requirements for this loan which can be easily met by qualifying.
- Credit card score
The borrower must have a credit card score of 580 or higher.
- Debt-to-Income Ratio
The debt-to-income ratio determines whether the borrower is able to afford the loan. If the debt to income ratio is 47% then the borrower qualifies for FHA Cash-Out Refinance.
- Maximum Loan-to-Value
The maximum of the loan-to-value is 80% of the current value of the house.
- Payment History
The borrower requires a payment history of the last 12 months. The document determines whether the borrower is paying the monthly payments on time.
FHA streamline Refinance
The advantage of this refinance is that it allows you to reduce the interest rate without any valuation. Its further advantage is that it saves both money and time. It also reduces the number of documents required from the lender. It mentions some requirements to qualify for this refinance.
- Mortgages must be FHA insured
Borrower’s existing mortgages are FHA-insured and only they are allowed to apply for Streamline.
- Must be an existing mortgage
You will qualify if you do not miss the payment of your existing mortgage. You must make regular monthly payments and have 6 monthly payment history. Your existing mortgage term must be a minimum of 210 days.
- Net Tangible Benefit
Borrowers benefit by applying for streamline refinancing.
FHA Simple Refinance
Through this refinance, the borrower can apply for a new loan from their existing FHA loan. This refinancing is more straightforward than others. If the borrower meets the requirements of the loan, he will qualify for the loan. The lender will take the necessary documents from the borrower about the credit card history, income and asset details.
However, the borrower must consider some factors before availing refinancing benefits.
- Low monthly payment
These mortgages have lower interest rates which pay less monthly payments.
- Switch to a Fixed Rate Loan
The largest monthly payment can be avoided through this refinace. There will be a fixed payment for each month that will not increase.
- Earn Cash on equity
You will be allowed to borrow the largest amount of cash against home equity. By this liquid the borrower gets the freedom to spend the most. You will get cash through equity liquidation.
FHA Rehab Mortgage
FHA Rehab Mortgage provides loans to buyers who purchase an old home but wish to have it renovated. FHA 203 (k) Rehabilitation provides a loan to a borrower to purchase and renovate an old home. The purposes for which this mortgage financing is allowed to be used are:
- The borrower can change and restructure the house.
- Buyers will be able to upgrade and improve through the home version.
- The house provides health and safety to the family.
- Making house changes will improve the look of the house.
- Be able to rebuild the plumbing of the house.
- You can replace gutters, roofs.
- You can change or replace the floor.
- Working on landscape and property boundaries.
- Replacing and improving home energy conservation.
FHA Reverses Mortgage
This mortgage is designed for senior citizens. If the borrower is 62 years of age or older, he gets cash on the equity available in his house. However, the main condition is that the house must be the primary residence of the borrower.