Things to Know About FHA Refinance Terms

If you are interested in refinancing your home with an FHA refinance, you should be aware of several of the terms and conditions before you begin the process. FHA refinancing is a program that is designed to help you save money on your monthly mortgage; it is not the same as the HOPE program which is designed to keep you from going into default or foreclosure. FHA refinances help you lower your monthly mortgage payments, which can help you avoid foreclosure, but is designed to ultimately help you save money over the remaining years on your home loan.

There are a variety of FHA refinance loans, which contain their own specific terms and conditions. These are:

• Cash-out refinance with a value up to 85% of the home's value
• Cash-out refinance with a value up to 95% of the home's value
• No cash-out refinancing
• FHA Streamline refinance

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Determining which kind of refinance is best for you depends on your needs. If you are interested in receiving cash and using the money to make home improvements or pay off other bills, then a cash-out refinance is going to be your best bet. In order to qualify for a cash-out, however, you must have owned the home for at least one year. If you are interested in lowering your monthly payment and interest rate, then a basic or streamline refinance is your best option. These will also work better for you if you have not owner your property for the minimum one year period.

For some of the FHA refinance options, you may be required to pre-qualify, similar to the process that took place when applying for the original FHA loan on your home. In most cases, a credit check is not required to qualify for the refinance process. You are, however, required to be current on your mortgage payments and must show proof of on-time payments for the previous year. Finally, the typical 3.5% down payment that is required for all FHA mortgages is not required to be paid again for a refinance. Since the payment has already been made, the refinance process is allowed to be instated without the need of a down payment. Although you are not required to make a down payment, you will be required to pay all closing costs.