There are three different sorts of Federal Housing Administration refinancing loans, and the eligibility requirements vary depending on what choice you pursue. You may qualify for an FHA streamline refinance, a cash-out FHA refinance or an FHA replacement loan. The first two options require an existing FHA loan, while the latter requires an current conventional (non-FHA) loan. Some prerequisites are the exact same no matter which sort of FHA refinance you’re doing.
Existing Mortgage
You can’t qualify for any type of FHA refinance loan if you are not current on your current mortgage loan. If you are behind on your current mortgage, even by a week or two, you will need to make a payment to bring the loan current before you submit your refinance application. If you are significantly late, this payment will probably need to include late penalties and default on the sum that is late.
Credit Issues
You won’t qualify for the cash-out FHA refinance loan or the FHA replacement loan when certain items appear on your credit score. To begin with, if you’ve filed for bankruptcy over the last two years, you won’t qualify to refinance. Similarly, you won’t qualify if you have an existing tax lien which you are not currently paying off. Finally, you won’t qualify for the credit report reveals a number of late payments on any of your debts over the past two years.
Streamline
An FHA streamline refinance is, as the name suggests, the easiest way to meet the requirements for an FHA refinance loan. An FHA streamline refinance requires very little new paperwork since the refinance application replicates the application you submitted on your existing FHA loan. This includes credit reports, income statements, bank statements, evaluation and inspections. The critical requirements for an FHA streamline refinance are that you still have work and your new FHA loan has to result in lower monthly payments than your existing FHA loan. It does not matter if you have credit issues that have appeared since you took out your current mortgage since at a refinance refinance the new lender will not even pull your current credit report.
Money Out
To qualify for a cash-out FHA refinance loan, you must have an existing FHA loan and sufficient equity in the home to draw some and still meet the FHA down payment requirements. If your current credit score is 580 or higher, then you need at least 3.5 percent equity in the home. But if your credit score is less than 580, you need at least 10 percent equity in the home. You will have to cover a current property appraisal to determine the current market value of your home. You will also have to confirm that the monthly payments on your refinance loan are less than 29 percent of your current monthly earnings.
FHA Replacement Loan
If you have an existing traditional mortgage loan, you could have the ability to qualify for an FHA replacement loan. The credit, down payment and income requirements for an FHA replacement loan would be the same as for a cash-out FHA refinance.
