While homeowners typically equate the FHA loan program with low-down payment mortgages, FHA refinances are also available.
In addition to easy-to-source rate-and-term and streamline refinances that replace an existing FHA mortgage with a better one, the FHA even offers cash-out refinance loans.
A cash-out FHA loan refinance allows the borrower to take out up to 85 percent of the value of his property. In today's market, the ability to pull out 85 percent of a home's equity is attractive, but not as generous as a 96.5 percent FHA purchase mortgage.
Nevertheless, while the borrower doesn't get the high leverage of a regular FHA mortgage, he still gets many of its other benefits.
FHA Refinance Requirements
FHA cash-out refinances don't impose limitations on how borrowers use the cash they take out. In addition, they also don't require the applicant to have stellar credit.
It's possible that someone could qualify with a credit score in the 500s. What they don't need is an existing FHA mortgage -- FHA cash-out loans are available even when a borrower is coming from a conventional mortgage.
100% And Beyond
It is also possible to borrow more than 100 percent of your home's value through the FHA 203(k) program. 203(k) loans have one catch, though. Borrowers have to spend the money on their home.
203(k) loans are sometimes referred to as rehabilitation loans. Based on the assumption that the repairs or renovations performed with the money will raise the home's value, the FHA lets borrowers take out extra money to pay for them.
Applying for a 203(k) loan isn't always easy, but it can provide extra money for repairs. If a borrower thinks of an FHA loan as only being a tool to buy a house, he is missing out on some of the FHA program's biggest benefits.
For many people, it is also the best cash-out refinance program available, whether in its traditional or in its 203(k) guise.
Labels: FHA Loan, Home Mortgage Tips, Refinancing Your Home
Before an owner can market a property to buyers that want to use a FHA loan, he will want to familiarize himself with the FHA's standards. FHA won't insure loans on just any property.
While their standards aren't as stringent as they used to be, a home needs to be in relatively good condition to qualify for FHA financing.
Location And Lot
To qualify for FHA financing, the property has to be located on a road or easement that lets the owner freely enter and exit.
The access also has to be paved with a surface that will work all year a long dirt driveway that washes out in spring won't qualify.
The FHA also wants the lot to be safe and free of pollution, radiation and other hazards. For that matter, it also needs to provide adequate drainage to keep water away from the house.
Property Exterior
The FHA's requirements for making a loan start with the home's roof. To pass muster, the house must have a watertight roof with some future life left. In addition, if the roof has three or more layers of old shingles, they must all be torn off as part of the replacement process.
The property's exterior has to be free of chipped or damaged paint if the home has any risk of having lead paint. Its foundation should also be free of signs of exterior (and interior) damage. It also needs full exterior walls.
Property Interior
The property's interior also needs to be inspected. FHA standards require that the home's major systems be in good working order.
Bedrooms should have egress routes for fire safety and the attic and basement should be free of signs of water or mold damage.
The bottom line is that the FHA wants to make loans on homes that borrowers can occupy. This doesn't mean that a home has to be in perfect condition to be sold to an FHA mortgage-using borrower. It just needs to be a place that they can live.
Labels: FHA Loan, Home Mortgage Tips, Homebuyer Tips
