The Federal Housing Administration was formed in 1934 to ensure American borrowers would experience fair lending for mortgage refinancing and purchase loans regardless of their job type or skin color.  Over the years FHA refinance loans have become a popular option because the FHA mortgage rates are low and the credit guidelines are more forgiving than conventional mortgage lending guidelines.  In the last 3 years, FHA refinancing has actually taken the lead for mortgage market-share nationally.

There are several types of FHA home loans for refinancing:

• Cash out refinancing for raising capital or debt consolidation
• FHA streamline loans for refinancing existing FHA loans
• FHA refinance loans up to 97% Loan to Value
• FHA 203k loans for home rehabilitation.

In these situations homeowners must have some equity in their home to be able to qualify for FHA loan programs. FHA guidelines also stipulate that FHA loans may only be used to borrow against the home of their primary residence. 

FHA home refinancing ensures low fixed mortgage rates and no pre-payment penalties. FHA refinance loans are underwritten differently than traditional conforming mortgage refinance loans.  A person’s income and credit will be viewed more leniently or not at all with an FHA refinance.   FHA loans require mortgage insurance, but less equity is needed to qualify.  FHA streamline refinance does not offer the option of getting cash back and you must presently have a FHA mortgage with no late payments in the last year.  FHA 203K loans provide funds for home rehabilitation and major home improvements.

FHA continues to carry the mortgage industry on its back in 2009.  FHA may have eliminated the FHASecure refinance product, but Hope for Homeowners will help distressed homeowner who have no equity and a mortgage that they can no longer afford.  FHA home loan products still allows cash out refinance loans to 95% but now they will need to appraisals to meet HUD’s new FHA guidelines for cash out refinancing above 85% loan to value. 

Borrowers with low credit scores may still qualify for bad credit mortgage refinancing, even if they were recently turned down by another lender.  FHA continues to expand its loan product base, whether it’s a first time homebuyer loan, FHA streamline or Hope for Homeowners, FHA mortgage rates are low and the terms are usually fixed with no penalty for early pay-off or refinance.  Bloomberg Interviews with HUD Secretary Steven Preston

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