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How To Refinance An FHA Loan

December 17, 2020

mortgage broker explaining to couple how to refinance an FHA loanHomeowners with FHA loans might choose to refinance at some point to gain more favorable terms. A refinance can lower your monthly payment, reduce the term of your loan or even allow you to access some cash from the equity you have built in your home for bills or remodeling. Knowing how to refinance an FHA loan can be very beneficial.

What Are The Different FHA Loan Refinancing Options?

Homeowners who are looking to refinance their FHA loan can choose from a few different options depending on their goals, their payment status and the current value of their home. Outlined below are a few popular refinance options for FHA loans.

FHA Streamline Refinance Program

Many homeowners are hesitant to refinance because they are concerned about all the paperwork and time involved. An FHA Streamline Refinance, as the name implies, offers a quick and efficient process to save borrowers time and money. It is based on the assumption that borrowers who have already passed the FHA requirements for their original loan do not need to be vetted as closely the second time around. This type of refinance aims to lower your interest rate and monthly payment.

FHA To Conventional Loan

Some homeowners choose to refinance out of their FHA loan entirely and secure a conventional loan instead. The main reason for taking this approach is removing the upfront and yearly mortgage insurance requirement seen with FHA loans. Another benefit is the higher loan limits of this type of loan. This can be a more expensive type of refinance than refinancing into a new FHA mortgage, but it may make sense if current interest rates are lower than the rate you are paying, the value of your home has increased or you have significant equity in your home.

Borrowers refinancing to a conventional loan will generally need a credit score of 660 or greater, a debt-to-income ratio that is 43 percent or less and a loan-to-value ratio that is 80 percent or greater, although guidelines vary by lender.

FHA Cash-Out Refinance Option

An FHA Cash-Out refinance is a viable option for homeowners who would like to tap into their home equity for things like home improvements or to pay bills, and it is generally straightforward. The homeowner applies for a new FHA loan according to the current market value of their property. The new loan pays off the first mortgage, and the homeowner keeps the difference between the two amounts in cash.

This is a bit more complex than a Streamline refinance but is a good choice when cash is needed. For a cash-out refinance, at least 15 percent equity in the property is required.

FHA Reverse Mortgage

home loan being calculated An FHA reverse mortgage is geared toward homeowners who are aged 62 and above. It enables them to convert the equity in their home to income or a credit line, and it is paid back when the homeowner stops occupying the property. There are no income or credit requirements, and the amount of the mortgage is based on the value of the home in a current appraisal or the FHA insurance limit.

How To Refinance Your FHA Loan

Below are the steps involved in refinancing your FHA loan using the popular FHA Streamline Refinance.

Ensure you qualify

First, you must ensure that you qualify for FHA Streamline. Homeowners should have an existing FHA-insured loan and be current on their payments. The existing FHA loan must be at least 210 days old. There also must be a net tangible benefit, such as making it easier for the borrower to make their monthly payments on time.

Contact lenders

Call mortgage lenders in your area to inquire about the rates and fees for an FHA Streamline Refinance. Compare these rates and choose a lender with whom you feel comfortable. Make sure they are on the list of lenders approved by the Department of Housing and Urban Development.

Decide how to handle closing costs

The closing costs of the loan can be paid up front or rolled into monthly payments. If you decide to roll them into the payments, the lender is required to order a home appraisal to determine its current market value.

Complete the paperwork

This type of refinance might have less paperwork than your original loan, but you will still need to fill out and sign the Uniform Residential Loan Application, or 1003, supplied by your lender. You will be asked to disclose basic financial information such as yearly income, monthly debt obligations and length of employment.

Sign the closing documents

Once the above steps are complete, you will sign the closing documents that your lender provides to finalize the deal. This is also when the closing costs are due if you have chosen to pay them up front.

Will FHA Refinancing Affect My Credit?

women looking at refinancing her home loan with a brokerHUD does not require a credit check for FHA streamline refinances, so it should not have an impact on your credit. If you are refinancing to a conventional loan, however, lenders will check your credit score and your credit history. This will result in a hard inquiry on your report, which could cause a slight drop in your credit score.

This is only temporary, however, and the benefits may outweigh the temporary drop. For example, as you pay off your new loan, you could see your credit score improve as a result of a strong payment history.

Reach Out To A Professional Mortgage Brokerage

If you are looking to refinance an FHA loan, get in touch with the professional mortgage brokerage at My Lending Pal today to review your options and find the ideal refinance for you.

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MyLendingPal, Inc, NMLS ID #1734346, (www.nmlsconsumeraccess.org); Corporate Office: 5400 Laurel Springs Parkway, Suite 304, Suwanee, GA 30024. Georgia Residential Mortgage Licensee #61544. Principal Loan Originator: Ricky Merchant, NMLS ID: 1517056. Georgia License # 54264. For questions regarding state licensing, please contact (404) 433-8918. Not all products and options are available in all states. Terms are subject to change without notice. Any rates or terms are speculative only and can change without notice.
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MyLendingPal, Inc
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Balachandar Sundaresan
Balachandar Sundaresan
17:30 23 Jun 20
Roger Merchant and his team were very helpful, right from getting a great rate to completing all process on time and being super responsive. Would happily recommend him!!
Dinesh Nair
Dinesh Nair
14:41 30 Jan 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Ramesh Kumar
Ramesh Kumar
02:03 17 Dec 19
I would really recommend Nations First Home Mortgage, if you are looking for the best home mortgage options. I was very much glad to work with this team and they have saved lot of time and money!!
gulshan rai
gulshan rai
03:21 17 Apr 19
I would highly recommend Mr Roger to anyone in the area looking for an amazing lender. He made the mortgage process so easy and effortless. I could tell him and his team were very attentive to all the details that came with applying for a mortgage and were quick to remind me of any deadlines that were approaching.It was super easy to work with Mr Roger.My special thanks to preeti who did an amazing job to get things done in the timely manner. If I had any questions, it was almost like she was waiting at her desk for my phone call to answer the questions immediately. The loans closed on time and without a glitch. I would highly recommend them to anyone
Ajith Nair
Ajith Nair
01:50 13 May 19
We highly recommend Roger for financing mortgage. Roger and his team were excellent through out the process and we had a very smooth purchase. They were always available when we had any questions. It was an amazing experience working with Roger and his team.
Pratul Patwari
Pratul Patwari
13:03 20 Jul 20
Roger Merchant and Priti Vin helped us in buying our first home. They understood our needs and took care of everything for us. They were very good with the communication through the process. They will always be my first choice in future for the mortgage services.
Sujatha Hariharan
Sujatha Hariharan
20:51 26 Jul 20
They were able to find me great rates. Service was quick and communication prompt. The loan process can be daunting as is the document gathering process but this was the easiest and quickest that I have experienced. Highly recommend!
Dinesh Nair
Dinesh Nair
15:53 30 Jul 20
I would definitely recommend MyLending Pal for all mortgage needs. It all started with a great competitive quote on refinance and excellent service continuing all the way until closing. Priti, Ricky and Roger were a pleasure to work with.
Manu Pushpanath
Manu Pushpanath
15:59 29 Jul 20
Great lender to work with. Right from document collection till closing they did it in 2weeks. The fastest closing I heard and get to experience myself. One improvement I suggest is it will be good if the closing attorney can come into the house for completing the closing. Considering current situation it will add a lot of value to the reputation. Thanks Milan and team for a good closing experience.
Sakthi S
Sakthi S
20:46 01 Sep 20
Would definitely recommend Roger and his team.Refinanced for the second time and with roger, I didn’t feel like I refinanced.The process was very smooth and fast.The rates were very competitive and it was amazingworking with Roger and his team.I’d recommend him for sure.
Sunny Patel
Sunny Patel
21:17 01 Sep 20
They were quick, courteous, and professional. They got me an excellent rate and helped make the process smooth. I would recommend using to my friends and family!
Emmitt Rathore
Emmitt Rathore
14:57 22 Dec 20
Roger helped us find an unbeatable rate!His decades of work in the industry made it easy for us to complete many processes with the lender, and helped us close on time!I will definitely be passing the good word around and recommending family and friends to him.I look forward to our next real estate transaction with them.
M Alamoti
M Alamoti
01:02 11 Jan 21
I had the experience of using their service. They know what they are doing. They are very honest, professional and caring. I have no doubt and hesitation to recommend them to anyone who is looking to purchase a home. I am very pleased for their service.
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