There are several options for FHA home refinances. The first is the FHA Cash Refinance. This choice is usually a good one for those whose home value has increased since the time the property was purchased.
The borrower can refinance the existing mortgage by applying for another FHA mortgage in an amount greater than the amount of the current debt. The old mortgage is paid off and the borrower receives the difference between the amount of the new mortgage and the balance of the old loan less all closing costs, unless the borrower pays them in cash at closing. The money is usually given to the mortgage in the form of a check written by the title company.
Another option for FHA mortgage refinance is a streamlined mortgage refinance.
This option is known as a streamlined refinance mortgage because the interest rate on your current home loan is reduced faster and more easily than with a regular or cash refinance. Sometimes this type of refinancing doesn’t even require an appraisal.
Since Streamline FHA Mortgage Refinancing requires less paperwork, it reduces the costs and time required to complete the transaction. This type of mortgage refinance requires that the original mortgage loan be an FHA loan. Another requirement is that the refinancing must reduce the borrower’s monthly payments. This option does not give the buyer the opportunity to get cash at closing. It is only used for the purpose of lowering the interest rate that the borrower pays each month.
Another option is to refinance a loan that is not an FHA loan. It does not imply simplified refinancing. In this case, if the current loan on the borrower’s property is a conventional mortgage, the borrower may refinance up to 96.5% of the current appraisal value of the property. Therefore, if the property is appraised at $100,000, the borrower can use the $96,500 FHA home refinance.
Yet another option is the HOPE for Homeowners Program. This alternative was introduced to borrowers in 2008. Its purpose was to refinance mortgages through FHA for those who were struggling but still had to meet certain criteria. Starting today, the program will run through September 30, 2011. When a homeowner is facing foreclosure, they can refinance an existing mortgage into a new mortgage at 90% of the home’s appraised value. The homeowner must still qualify for the loan and must meet certain criteria. If the owner purchased a home several years ago for $200,000 and now the same property is worth only $100,000, FHA will insure the loan for $93,000 (93% of the recent appraised value). This, in turn, would significantly reduce the monthly payment. The only problem is that lenders are not required to participate, so since it works against their financial interests, this plan is unlikely to provide real change for those who need it.