FHA Mortgage Basics NASDAQ
Just what is an FHA mortgage? Who can obtain one? What are the advantages and disadvantages compared to other types of home loans?
Pretty straightforward questions, but it can be hard to find all the answers in one place. The following summarizes some of the most important things borrowers need to know about FHA mortgages.
What is FHA?
FHA stands for the Federal Housing Administration, a government agency that promotes access to home ownership and stability in the mortgage market. Originally established as a New Deal program during the Great Depression, it operates as part of the Department of Housing and Urban Development (HUD).
What's an FHA mortgage?
The FHA doesn't actually make home loans to borrowers, but insures mortgages that meet certain standards. This guarantee allows certain types of borrowers to obtain mortgages on more favorable terms than they could in the private mortgage market. The actual loans are made by private lenders who are authorized to deal in FHA mortgages.
FHA Cash Out Refinance Guidelines
Here are the basic guidelines for an FHA cash out refinance loan. The credit score requirement is still in the 640 range and debt ratio limits remain around 47%. That means the guidelines are still more liberal than conventional loans.
Cash-out FHA refinance loans on properties owned more than one year prior to the FHA refinance are permitted on owner occupied principal residences only, and are limited to 95% of the appraised value up to a base loan amount of $417,000. If the base loan amount (loan amount prior to adding the MIP premium) is greater than $417,000, then the maximum loan to value is limited to 85%.
A cash-out FHA refinance loan is when a borrower refinances their current mortgage for more than they owe in order to pull out the built up equity that has accrued in the home. The amount a home owner can borrower is limited by the value of the property compared to the loan amount (otherwise known as the loan-to-value or LTV).
The following are basic requirements of a cash-out FHA refinance home loan:
FHA will now require a second appraisal for all cash-out refinances where the LTV, exclusive of the UFMIP, will exceed 85 percent of the appraiser’s estimate of value. This second appraisal requirement applies regardless of the loan amount or the location of the property, i.e., whether the property is in a “declining area” or is not. This second appraisal requirement for cash-out refinances is effective for all case number assignments on or after January 1, 2009
Borrowers who are delinquent or in arrears under the terms and conditions of their current mortgage(s) are not eligible for a cash-out FHA refinance.
The subject property must have been owned by the borrower as his or her principal residence for at least 12 months preceding the date of the loan application. If the borrower has not owned the the property for a minimum of 12 months, the FHA refinanced insured new mortgage is capped at 85 percent LTV. In such cases, the FHA mortgage amount must be calculated using the lesser of the appraised value or the original sales price of the property multiplied by 85%.
...Refinance Help. Fill this form and get help!
FHA Mortgage Loans with Cash Out Refinancing
Nationwide Mortgage Loans provides low rate FHA loans with Cash Out refinancing options for borrowers looking to raise capital and consolidate ...
where can I find the current rate for cash out FHA refinance?
We live in Suffolk County, NY. We have excellent credit and no debt. I want to double check that the broker is getting us the best rate.
Wow, I didn't even realize they were doing FHA cash out refinances these days.
Conventional rates are easy to check at Bankrate.com. Don't know about FHA.
FHA cash out refinance situation? help needed?!?
I'm thinking of doing FHA cash out refinance for my home. My current loan is an ARM and wants to change it to a 30-fixed. Can anyone that is a loan specialist or an underwriter or anyone that has any knowledge about loans tell me if my situation has a possibility that it could be approved? Or if it can't what other options do I have?
Here's me & my husband overall situation:
- Credit score’s are low between 550 and 580
- 1 late payment with current mortgage for the month of July 08
-we are both employed
- Me for 4 years
- husband for 7 years but took 1 year off for an illness in the family then went back to the same company.
- Our income is good don't have to worry about that part
- Home equity of about $200,000.00
- Just want to take out about $50,000.00
I'm desperate for any help that I can get because my ARM has expired. And I can't afford to keep up with these high payments.
Let me know any lenders or anyone that can help me.
Thank you!!
with the present crisis and everything up in the air who knows -- everyone is awaiting guidance -- suggest you test the waters and approach your local bank and see what they say first hand!!!
Contact the nearest Wells Fargo Bank (i don't work there)..
FHA - Can a person who has not previously used FHA to purchase their home benefit from a refinance through FHA
A friend of mine is trying to refinance. However, he ran into some issues that will not allow him to get approved for this loan conventionally. Can FHA be a viable option for someone who is looking for a cash out refinance? I told him that there would still be that upfront PMI..what would be the benefit?
Benefits-
FHA.may qualify him.
FHA rates are good right now.
FHA allows cash out with few restrictions.
The Tax Write offs on the closing costs, MIP and future interest payments.
Lowering his rate will lower his monthly payment on his existing principle balance. The extra cash out will be at a good fixed interest rate and the interest costs should be tax deductible. The cost of the upfront MIP should also be tax deductile under the current tax codes.
If I needed the money, low cost, fixed interest rate money is always a great option.
The Negatives:
More and more lenders are adding risk based fees on borrowers with low credit scores. (580 or less)
Edit: Lisa L is correct- FHA guidlines will allow cash out up to 95% on some property types; on others, mobile homes for example the most you can borrow in a cash out refi is 70% ltv depending on it's year of manufacture and condition.
why is my FHA pre-approval taking so long on cash out refinance?
i will have 43% dti (after the refinance) and applied from a bank to cash out on property I don't owe anything on. I applied around dec 18th and i have not heard back on whether i was pre approved or not. everytime i call the bank, the guy tells me it will take a few days and that he will call me in a day or two at the most. then he never calls and i end up calling him 4 or 5 days later and he says the same thing.
i have asked twice now to deal with someone else at the bank and he always finds out and then calls me and says it will be 2 more days. i gave him my application info over the phone, but he has never asked for any paperwork. does it really take that long? does this mean i am not going to get approved? is he just being lazy?
i have had the appraisal done by a different company, which the bank said they will accept. the loan is to consolidate debt and about 6k cash out
I really like this one...
Liz said:
"Well when I did mortgages, you couldnt' get cash out on an FHA loan. So that could be why...
I worked with alot of people who didn't actually know very much about their job as a mortgage loan officer. Kinda sucky....
There's alot I'm not sure of, but it sounds like your loan officer just doesn't know what they are doing"
http://www.hud.gov/offices/hsg/sfh/ref/sfhp2-19.cfm
Have a look at A1, FHA CASH OUT REFINANCE
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Anyway, back to your question. Go to a mortgage broker that's been doing this longer than a few months. They will be able to tell you whether it will be approved within a half hour. After that, your income/assets/appraisal will need to be verified.
I am a mortgage banker in TN & KY
Were you told it was FHA? It's possible that your loan officer didn't know the conditions and is trying to find a different mortgage or lender to do the loan and is stalling you.
I worked with alot of people who didn't actually know very much about their job as a mortgage loan officer. Kinda sucky.
Usually a pre-approval can be given in a matter of hours. And if they haven't requested any documentation, then it isn't a final approval with a clear to close. And has the house been appraised yet? That needs to be done too.
There's alot I'm not sure of, but it sounds like your loan officer just doesn't know what they are doing.
The only explanation i can think of is that you hired the wrong person to handle your loan. The manager of the branch will transfer your loan to someone else if you go in person and don't leave without a written guarantee that the loan will be "funded" by January 23. Be sure to use the word "funded" when speaking to a banker.
If they give you an excuse or ask you to give the 1st broker "just one more chance", walk out the door and don't look back..
FHA refinance loan?
We are trying to do a cash out refinance and have already done the appraisal of our house. We are looking to do a 95% cash-out refinance and our mortgage broker suggested an FHA loan. It seems to good to be true. What are the downsides?
The down side is that your closing costs tend to be higher. You have to pay 1 1/2 points in upfront PMI (often financed in the body of the loan) and regardless of how much your property increases in value, you have to pay your PMI for at least 5 years.
That is a bad move overall...and MIP is very difficult to get rid of.
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Do I need to repair everything in my home to get an FHA refinance appraisel?
Some of what I am refinancing for is to cash out to do the many repairs I need to do plus some new construction which will substantially improve the property value. Little did I plan on was the market crash which is forcing me to go FHA now while I am on a timeline with the permits etc. Can things like bad floor tiles a bad ceiling tile, an old door, or an unfinished existing project mess me up? Normally in a refinance I wouldnt worry about such thing too much but being FHA, I am not sure how critical they are.
Your appraisal will be based on the condition of your house. If your house needs work then the appraisal will be lower. Talk to your mortgage person there is a loan that is a 203K ( I think is the name). It allows you to have an as is appraisal and then a fixed up appraisal. As you do the work and you get the bills then you present it to the mortgage company and they give you the money. This might be the way to go.
FHA really wants to make sure the property is habitable, has full functioning facilities, is used as prescribed by zoning use, and generally not falling apart.
Please be very careful about adding new construction in today's market. Many items that once paid off in increased valuations no longer pay for themselves. Don't trust the opinion of a remodeler on this. Please check with some other sources.
All that being said, your best choice may be an FHA 203(K) or Streamline 203(K) loan. If you decide to go without the new construction, the streamline 203(K) may do the trick. If you are keeping the new construction in your plans, the regular FHA 203(K) will work well.
I live in Massachusetts and am about to refinance my current loan with a streamline FHA?
With this type of mortgage I realize I cannot do cash back.....will I skip a monthly payment like a typical mortgage?
I was told that the only difference between the streamline loan and the regular loan is that they don't verify your earnings/employment status.
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Do i need to have 20 % down when i refinance from FHA to Conforming and does the down amt from FHA counts?
Hello everyone. I am purchasing a house but the loan I could get was FHA because i did not have 20 % down and not enough credit for conforming loan. I could put 15 % down on the house but my question is whether i should do that or go with the minimum of 3 % because with FHA loan you pay premium mortgage insurance 1.5 % upfront and .5 higher interest rate. Lets say if i build a better credit in 6 months to qualify for a conforming rate and refinance the house from FHA to conforming do i need to have 20 % down for conforming loan or should i put the money to FHA loan and that 15 % is counted as home equity. All I need is 5 % after that right or do i need to have 20 % in cash?
I asked this question once but mostly i got people trying to get me to contact them for loans. I dont need that. Only respond if you know the answer.
Nop I cant get a conforming right now. I could come upwith the 20 % but not enought credit. Please answer about the amount i should put on FHA loan. Would the 15 % count when i refinance to confroming to make 20 % or do i need to hold the money so i can have them for the conforming loan in about 6 months when i build up my credit.
I have no choice FHA is what i am getting right now. Please focus on the question I need to know about the % amount whether it is better for me to put down 15 % on the fha or should i put down 3 % and save the money for the conforming when i refinance. I would put 15 % if the money counts toward the refinance to conforming in the future to make 20 %. total after adding 5 %.
ok here it is. Once you have an FHA note then you can streamline the note if rates drop and you will be given credit for a portion of the upfront MIP that was not used. Next FHA requires not less than 3.5% down payment as of 1-1-09. You can put more down if you wish. That will not take off the monthly MIP. Now you do the MIP is a tax preference item and you can deduct the MIP just like you can PMI in a conforming loan. So once either you have paid down to less than 80% of the value or your home has increased in value and you get to less than 80% it makes no difference as to what loan you have. The rates are just slightly higher conforming vs FHA and the FHA MIP is based on credit scores now so the up front could be as high as 2%-a low of 1.5%. You can put as much down as you wish as yes you are getting equity. With that I as a loan officer would rather you have an emergency fund that is used only for the emergency's in life and then replaced if ever tapped into. When it comes time to refinance this note you may want to throw the cash at the pricipal at that time if you wish
Just my thoughts on the subject
Do I need to have 20 % down payment when I refinance from FHA loan to conforming ?
Hello everyone. I am purchasing a house but the loan I could get was FHA because i did not have 20 % down and not enough credit for conforming loan. I could put 15 % down on the house but my question is whether i should do that or go with the minimum of 3 % because with FHA loan you pay premium mortgage insurance 1.5 % upfront and .5 higher interest rate. Lets say if i build a better credit in 6 months to qualify for a conforming rate and refinance the house from FHA to conforming do i need to have 20 % down for conforming loan or should i put the money to FHA loan and that 15 % is counted as home equity. All I need is 5 % after that right or do i need to have 20 % in cash?
First to Marty S. How come your answer to everyone is the same(I have a company who can do this contact me. Do you not know the answers yourself and are just trying to get anyone to call you and then see if you can handle the mortgage?).
To answer your question it would depend on a few factors. The most important one is. What is your current credit score? If it is mediocre then I would put the minimum down and go FHA. If it is above 720 then I would put the 15% down and go conventional and submit a new appraisal about 1 year from now to have the PMI removed. Because with a FHA you must carry the PMI for a minimum of 5 years regardless of how much you put down.
Help with mortgage refinance?
Ok, so we are refinancing our house to get a lower rate, combine the 1st and 2nd loans, and pull a little cash out. Our personal bank has approved us for a refinance with an FHA loan. I got the paperwork today and do not understand a thing...they want like all sorts of documention and they want me to pay off old debts before I close. This seems like a huge hassle to me. Can anyone explain the pros and cons of an FHA loan? I remember hearing bad things about them...
Here are a few pros of FHA loans:
FHA loans are designed to make housing more affordable, particularly for first-time homebuyers. FHA loans typically permit borrowers to buy a home with a lower down payment than conventional loans.
The Cons:
You are experiencing them now. Lots of paperwork, rules and oversight.
Since you are already in process, the responsibility for walking you through the loan is on your current bank. Make sure you understand EVERYTHING before you sign anything. Ask questions. If you don't understand the answers, keep asking.
And make sure you are getting the best deal possible before you close the deal. After, it may be too late.