FHA Refinance Rules
The Federal Housing Authority offers loan refinancing programs to qualifying members of the public. These programs are intended to provide assistance to homeowners who have struggled to make payments, or just desire a better interest rate and retooled mortgage. There are rules that govern who is eligible and how a person can apply.
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Requirements
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To be eligible for any loan refinance program from the FHA, a person must meet certain general requirements. If you are seeking a refinance loan, you must be of legal age to sign a mortgage in your state, usually over 18 years old; must be a legal resident of the United States; and must have a valid Social Security number. An Individual Tax Identification Number cannot substitute for a SSN. Other specific requirements include a 31/43 debt-to-income ratio, and an acceptable credit history--usually including a FICO score of 600 or more. If your FICO score is less than 580, you will have to pay a 10 percent down payment. The mortgage balance must be less than $729,750.
Refinance Programs
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There are three programs offered by FHA for refinancing: FHA Rate/Term Refinance, Cash-Out Refinance and Streamline Refinance. The FHA Rate/Term Refinance is for those who already have a fixed or adjustable rate mortgage and want to shift into an FHA fixed-rate mortgage. A Cash-Out FHA Refinance Loan allows a homeowner to access the equity in the home and is particularly suited for homes that have increased in value. The FHA Streamline Refinance lowers the interest rate on an existing FHA mortgage, or allows conversion from an ARM to an FHA fixed rate mortgage. The Streamline Refinance is considerably more simple and quicker than the two other programs.
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Other Rules
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A person seeking an FHA refinance loan who has already been through the mortgage qualification process may have to re-qualify, depending on the type of loan. Those who already have an FHA loan can go through the streamline process. Those who refinancing a subprime or non-FHA mortgage will have to re-qualify. If you have been through a Chapter 7 bankruptcy that has been discharged for two years or more, you can apply for a FHA refinance loan. If you have been through a Chapter 13 bankruptcy and have made payments for one year or longer, you are also eligible.
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References
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