Today’s FHA Refinance Loan Requirements
By Spencer Llewellyn
Are you currently considering refinancing your home? Maybe you have heard how interest rates are a 5 year lows or that FHA refinance loans and their updated programs have become wildly well loved. Lucky for you, both of those things are right making for an brilliant refinance opportunity. And it is no more hard to apply for an FHA Loan than it is for a Conventional Mortgage.
Before you choose to refinance, you should know the basic requirements for FHA Mortgages. To be eligible for FHA Refinance Loans, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your yucky monthly income. This is called the “Top Ratio” and it should be below 31%. You must also have enough income to pay your housing costs plus all additional monthly debt. This is called the “Bottom Ratio” and it needs to be below 43%. These percentages may be exceeded with compensating factors.
Your credit background will also be honestly considered. FHA refinance loan requirements are not really credit score driven, although it is helpful to have at least a 580 FICO score to obtain a quicker approval. FHA guidelines are written in a way that provides the borrower the benefit of the doubt that there had been, at some point in their past, circumstances beyond their control, and as long as the borrower has recovered from those circumstances in a reasonable manner, they’re generally going to be credit-eligible for an FHA refinance loan.
If you have had a previous bankruptcy, it may still be possible to get an FHA Refinance. If you have been discharged from a Chapter 7 bankruptcy for two years or more, you are eligible to apply for an FHA refinance loan. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time and as agreed for at least one year, you are also eligible to make an FHA loan application.
FHA Refinance Loan Requirements provide multiple options to meet the needs of your current home equity scenario. If your home has positive equity, you may be able to refinance up to 98.75% or 97.75% of the appraised value of the home or the amount you are refinancing plus closing costs, whichever is lower. If you wish to take cash out of the property, then the maximum financing amount is either 95% or 85% of the current appraised value, depending on the borrowers qualifications. If you do not have sufficient equity in your home to payoff your current mortgage or cover your refinancing closing costs, then you should question your lender to consider a “Write Down”. A “Write Down” is when your lender writes off the excess balance owed for the purposes of refinancing a loan. The Housing Bill that goes into effect on October 1st provide for a Write Down to 90% of the current appraised value for delinquent mortgage FHA refinances. Offering this option is at the discretion of the lender.
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Tags:
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