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by: ConnieSanders
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FHA mortgages have always been very good loans for the homebuyer. In today's market the FHA refinance programs offer maximum benefits to the homeowner that wants to lower payments or get out of an adjustable rate mortgage. FHA offers three types of refinance mortgage loans: Cash-Out, No Cash-Out, and Streamline Refinance.

A FHA streamline refinance can only be used to refinance a current FHA mortgage and it should lower payments. This program will not allow the borrower to receive any money back at closing. The main advantage to this mortgage is that the borrower, under certain conditions, does not have to requalify for the loan. The mortgage may also be done with or without an appraisal.

Loan Type Conversion Allowed:

1. 30 yr fixed rate to 30 yr fixed rate: The new payment must be lower.

2. 30 yr fixed to 15 yr fixed: Payment may not be more than $50 higher than the original payment.

3. Fixed Rate to ARM: Owner occupied homes only

4. Adjustable Rate Mortgage to Fixed Rate Mortgage

5. ARM to ARM: Rate must be lower than current loan

6. 203k to 203b

FHA Streamline Refinance "Without" An Appraisal:

The new loan amount may not be more than the original loan amount, OR more than the current principle balance plus closing cost, ... Whichever is less. This only applies to owner occupied properties as non-owner occupied borrowers can only refinance the existing balance, and do not have the option of rolling in the closing costs.

The only credit verification required is mortgage payments. This can be done with 12 copies of cancelled checks, front and back. If cancelled checks are available, no in-file report is required unless the underwriter prefers that method to verify mortgage payments.

Streamline Refinance "With" An Appraisal:

An FHA streamline refinance with an appraisal allows the borrower to finance in the closing costs, discount points, and prepaids provided it all fits within the loan to value limits. The new loan amount may be the current principle plus closing costs, discount points and prepaids, OR, the appraised value x 97.75% (97.65%, or 97.15%, high or low cost state). Whichever is less!

IF the smallest of these two values is greater than the original mortgage balance credit verification is required.

Streamline Refinance - "Credit Qualification Required":

The loan amount is calculated based on the previous formulas and qualifying requires full employment verification, credit report, and debt to income ratio compliance. Typically these loans are used when the new mortgage payment will be higher, deletion of a borrower on new mortgage, or in assumptions involving due-on-sale clauses.

FHA "No Cash Out" Refinance:

This FHA no-cash-out refinance can be used to refinance a FHA mortgage, a VA mortgage, a conventional mortgage, or a non-conforming mortgage and requires the borrower to fully qualify. Second mortgages may be included in the new loan if they are older than one year, if not older than one year, you must prove that the funds were used solely to repair or rehabilitate the home. If not, paying off or including these loans would be considered a cash-out refinance.

This FHA loan can be used to buy out the equity of an ex-spouse provided it is documented in the divorce. It is still considered a no-cash-out because this equity is considered indebtedness.

IF the property was purchased less than a year ago and is not currently an FHA loan, the loan amount will be the appraised value plus closing cost, OR the original sales price plus closing cost. Whichever is less!

If the home purchase was more than a year ago and not currently FHA, the mortgage amount will be calculated the same as a "streamline refinance with an appraisal".

FHA Refinance "Cash Out":

This great loan can be used to refinance a FHA loan, a VA loan, or a Conventional loan. The advantage: Max loan to value is 90% for conventional loans but FHA loans allow 95% plus a portion of the closing costs.

About the Author

Connie Sanders built a web site to help homebuyers learn FHA guidelinesfha streamline refinance

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