FHA Refinances

Written By: Glenn Michaels, Op-Ed Writer

Know the FHA refinance program that is good for you. As a lender you need to recognize these programs as well.

Cash out refinances
This product allows a borrower to take equity out of their home. An FHA approved appraiser appraises the home and the lender can lend up to 85% of the appraised value.

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

This is a full income check loan and the borrower must qualify income, credit and asset in order to obtain this kind of financing.

203 (k) refinance
Individuals that own and occupy as their primary residence, 1 – 4 family units, condominiums, mixed use properties and manufactured homes can participate in this program.

There are two different 203 (k) programs, the “streamlined” and the “regular”.
Streamlined 203 (k)
In this program the borrower has no minimum dollar amount of repairs. There is a maximum dollar amount of $35,000.00 in repair costs. There can be no structural changes to the property.

There is no cash out to the borrower; all funds are used to satisfy an existing mortgage of record and to pay for repairs.

Regular 203 (k)
In this program the mortgage of record will be satisfied and funds greater than $35,000.00 will be used to make repairs. The minimum dollar amount of repairs is $5,000.00 and structural changes are permitted. There is no cash out to the borrower. All funds are used to satisfy the existing mortgage and to make the required repairs.

Credit qualifying rate term refinance
Borrowers can borrow up to 97% of the appraised value to satisfy their existing mortgage and due to adjustments at the closing and due to payoff figures the borrower cannot walk away from the closing with more than $500.00. Funds in excess of $500.00 change the transaction to cash out transaction and all cash out rules apply. When a borrower goes with this program some or all of the closing costs can be incorporated into this loan. DU or LP is required.

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

Streamline refinances with or without an appraisal
If a borrower has an existing FHA mortgage with a good payment history (paid on time during the previous twelve (12) months and there is a net tangible benefit for doing this transaction (a five (5%) percent reduction in the PITI or going from an adjustable rate mortgage to a fixed rate mortgage) without a full Uniform Residential Loan Application. The borrower cannot walk away from the closing table with more than $500.00. The new mortgage cannot exceed the original mortgage amount. The calculation for a streamline refinance has been simplified and in some cases the new upfront MIP is 1 basis point. DU or LP is not required and should not be used in this transaction.

About The Author

Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. 

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