FHA Home Loan Refinance

An FHA home loan refinance is subject to regulations put in place by the government. These regulations are amended frequently, and can depend on a wide range of factors. The year the home was purchased, the location of the home or the loan type may all be considerations when it comes to getting approved for refinancing.

FHA Loan Guidelines

Loan guidelines depend on wide variety factors, which may include but are not limited to the year of purchase, the geographical area you live in and the type of loan you are looking for. Regular refinancing of mortgage loans differs from refinancing cash equity loans or loans for home improvements.

FHA loan rules and regulation change constantly, so it is imperative to ensure that information being used to research refinance possibilities is current. Guidelines are constantly being amended to take into account market fluctuations, and variances also apply from state to state.

Loan Limits

Median prices of homes in any particular area cause loan limits to be reset regularly. Cash out amounts were previously accepted up to 95% of the home's worth, but new legislation passed in 2009 placed additional restrictions on homes that exceed 85% of the fair market value of the home.

Lenders may place additional restrictions at their own discretion, including but not limited to higher interest rates for high percentage loans or restrictions on loan amounts. The individual lender will make decisions based on a variety of factors.

The FHA has limited government exposure to housing markets risks by implementing its own guidelines concerning lending. This includes the requirement for a secondary appraisal for all cash out refinance loans which break the 85% loan to value ratio. This reduces lender risk in a depressed real estate market.

Rules and Regulations

Refinancing an FHA loan requires you to not be delinquent on your mortgage or other bills. FHA refinancing options are intended for those with real financial hardships, not individuals who have simply abused their credit and over extended themselves. The main reasons to seek an FHA refinance are financial hardship caused by job loss or illness, bad loans or upside down mortgages.

Normally a one year ownership period after the signing of the original mortgage must be fulfilled before you will qualify for refinancing of an FHA secured loan.Occasional exceptions are made, but options are limited and are generally offered based on the lower of two appraisals. It will generally be more financially feasible to wait a full 12 months in order to negotiate a decent refinance.

Other Considerations

Refinances are not allowed on second homes - only primary residences. Only single family homes or two unit properties qualify, and if there is a co-signor, they too must be in residence. Loan limits are based on home median pricing in the county, and a current list can be obtained through the FHA website or from an FHA approved lender. Your credit report will be pulled, and your score taken into account.

If you are looking into an FHA home loan refinance, it is wise to enlist the services of an attorney to ensure you are not taken advantage of.

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