FHA Refinance
FHA Refinance
FHA REFINANCE
HUD has uses 3 key points to determine what the maximum refinance mortgage amount. HUD will analyze the occupancy status of the property, what the loan proceeds are used for, and how/when the property was purchased.
When a Borrower purchases a property and in less than 1 year the Borrower wants to refinance, the Lender must look to see if the existing lien is already FHA insured. If the loan is not FHA insured the maximum LTV calculation must be applied to the lesser of the original sales price of the property or the present appraised value.
Only for No Cash-Out Refinances, allowable closing cost may be added to the price/value when calculating the loan amount, but not when calculating the maximum loan amount. NOTE: Streamline Refinances that do not require an appraisal, the new loan amount cannot surpass the old FHA loan amount that is going to be paid off.
If expenditures for repairs of the property are incurred after the purchase they may be added to the original sales price when the Lender is calculating the loan amount. The Borrower however must provide verification with written evidence of the acquired expenses.
For more information refer to the HUD Handbook 4155.1 Rev. 5.
CASH OUT REFINANCE:
Property has to be occupied by owner.
FHA requires an appraisal.
Borrower must qualify as if the loan transaction is a purchase.
The refinance loan is considered cash out if there is not an existing lien.
The State of Texas does not allow Cash-Out Refinances.
If current lien is HUD insured, UFMIP refund will apply.
Not included in the calculation are allowable closing cost.
RATE AND TERM REFINANCE:
Property has to be occupied by owner.
FHA requires an appraisal.
Borrower has to qualify for the loan transaction.
Borrower may not receive cash back at closing.
The Junior lien(s) has to subordinate to new 1st mortgage and the secondary lien terms must always meet HUD guidelines. LTV restrictions or lien(s) must be proved as seasoned (at least 1 year) if paid at closing.
If a junior lien is less than 1 year the Borrower must provide documentation that the lien funds were used for home improvements. If the Borrower used his/her own assets for home improvements then the loan proceeds may be used to replenish the Borrower.
If a line of credit has been seasoned over 1 year or opened less than 1 year, but total draws on line DO NOT EXCEED $1000, the line of credit may subordinate, or may be included in the payoff amount.
If current lien is FHA insured, UFMIP refund will apply.
STREAMLINE REFINANCES:
There are 3 kinds of Streamline Refinances: (If FHA to FHA)
1. Streamline with Appraisal.
2. Streamline without Appraisal.
3. Credit Qualifying Streamline.
Streamline Refinances are made to lower the monthly P&I payment on the existing FHA loan. With the Streamline Refinance the Borrower may not receive any cash back at closing. This transaction requires minimal documentations as long as the Title Holders to property are not changing and the monthly payment is not increasing. Streamline Refinance for a "Credit Qualify" loan will require qualifying information on total liabilities, income, and funds. Junior lien(s) subordinate.
Streamline Refinances require the following documents:
A history of the mortgage payment of the existing FHA loan. This must show the current FHA lien is in current status and is not past due and show that there are no late payments. The Lender may use a mortgage only credit report as verification of payment. However, for credit qualifying refinances the Lender must use a full credit report.
HUD forms required. The forms must be completed by the Borrower and the Lender.
1003 Application must be completely filled out
92900-B (Important Notice to Home Buyer) and 92900-A (Addendum).
FHA Assumption Notice Form.
Informed Consumer Choice Disclosure.
The Case # from the FHA Connection website and the Refinance Authorization information and CAIVRS.
A copy of the original note on the existing lien. This will let the Lender know the Note Holder's identity and the original loan amount. The Note will also show whether any UFMIP was paid in cash of if it was financed in the loan and it will show e current not RATE and first payment date of the existing lien.
Verification of the Borrower's Social Security Number
The Borrower must provide verification that the existing loan is at least 6 months old if the Borrower placed the FHA loan through a non-credit qualifying assumption.
LDP (Limited Denial of Participation) search must be done on all parties to the loan transaction (Borrowers, Brokers, Originator, etc.) and GSA.
Current payoff of existing lien for the most current month.
STREAMLINE WITH CREDIT QUALIFYING (ADDITIONAL DOCUMENTATION IS REQUIRED):
Full Credit Report.
Current paystubs to verify income.
Either a VOE or verbal verification of employment.
W-2 forms.
Current bank statements to support funds used for closing
Full appraisal.
CAIVRS search on all parties to transaction.
Other documentation as required by Underwriter upon review on file.
INVESTOR REFINANCE GUIDELINES:
Refinance using the "streamline without appraisal" guidelines.
New loan amount is based on the sum of the principal unpaid balance, less UFMIP refund + new UFMIP
The investor will pay closing cost out of pocket. There will be no closing cost added into the loan amount calculation.
Term of the new loan must not surpass the lesser of 30 years or unexpired term of the current lien + 12 years.
"Credit Qualifying" refinances can be done WITH or WITHOUT an appraisal.
Underwriting is performed to ensure the Borrower(s) qualify for the new loan.
Qualifying for the loan will be done when one or more of the following instances occurs:
1. The "Due on Sales" clause is triggered by original borrowers being deleted from title and/or mortgage liability
2. The Borrower took title to the FHA mortgage under an Assumption Agreement where is has not "credit qualified" and the Borrower has failed to make the payments for over 6 months.
3. Due to a payment increase of $50 per month the type/term of the current FHA mortgage is changing. This will only apply to owner occupied refinances.
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