FHA Refinance Mortgage
If you currently have a FHA loan and had it for at least six months, you are eligible to do a FHA Streamline refinance mortgage. A FHA streamline mortgage is available for current FHA mortgage loan borrowers who had their FHA loan for at least six months and have been timely on their mortgage payments. There is no appraisal required and no minimum credit scores required. You can be late on your monthly payments and have low credit scores and still qualify for a FHA streamline refinance mortgage as long as your FHA mortgage loan payments have been current for the past 12 months. There is no income verification needed either. You do need a full time job but the income will not be verified so high debt to income ratios will not be an issue. FHA streamline refinance mortgage loans are only for rate and term refinance mortgage loans only and cash-out FHA refinance mortgage does not apply. A rate and term refinance mortgage is only limited up to a $2,000 cash-out limit. Any proceeds over $2,000 from the proceeds of a refinance mortgage is considered a cash-out refinance mortgage.
Cash-Out FHA Refinance Mortgage Lending Guidelines
There are strict cash-out FHA refinance mortgage lending guidelines and seasoning requirements. You do not need a current FHA mortgage in order to do a cash-out FHA refinance mortgage. Any cash-out FHA refinance mortgage loan to value cannot exceed 85% of the appraisal. If the property has been owned by a homeowner for less than one year, the new cash-out FHA refinance mortgage needs to be either the lesser of 85% loan to value of the appraised value or 85% of the original purchase price. This poses a problem for a homeowner who purchased a foreclosure or short sale at a low price and invested tons of money rehabbing the property. For example, if a home buyer purchased the property at $100,000 and invested $100,000 in doing major renovations and has it appraised at $200,000 and wants to do a Cash-out FHA refinance mortgage in less than a year after they made the home purchase, then they are limited to 85% of the appraised value or 85% of the purchase price, whichever is lower. In this case, if the cash-out FHA refinance mortgage is getting refinanced in less than 12 months of the purchase date, then the homeowner will be limited to 85% of the purchase price and not 85% of the $200,000 appraised value. For the homeowner to get 85% cash-out FHA refinance mortgage loan, then the homeowner has to wait at least 12 months in order to initiate the cash-out FHA refinance mortgage. If the property was inherited and the heir is using it as an owner occupant home, then the cash-out FHA mortgage seasoning requirement is exempt.
Conventional Loan Refinance
Conventional loan refinance mortgage guidelines differ than FHA refinance mortgages. With conventional loans, you can do a rate and term refinance mortgage loan as well as cash-out refinance mortgage with six months seasoning. Maximum loan to value on conventional refinance mortgages are 80% loan to value based on the appraised value. Some conventional mortgage lenders may require two appraisals if the conventional refinance mortgage loan application is just six months from the original purchase date.
Related> FHA Cash-Out Refinance