Choosing a HUD refinance is the only option for some people who are unable to afford their high monthly mortgage payments. Before seeking a refinance, homeowners should have their finances in order. Look at mortgage documents and carefully scan the terms. Determine where the need for a refinance arises from, whether it is the balance, the interest or something else. There are fees for refinancing, so it is important to have a good reason.
Next, review the loan documents and see if it is an FHA loan. If it is, this will be indicated in the paperwork. In order to refinance this loan, the borrower must meet specific guidelines. They may not be the same as they were at the time the loan was originally granted. It is important to know the requirements before proceeding with the application process.
The first step after this is to apply for the FHA Streamline Refinance if the loan is by FHA. The good part about these loans is that they are fast. It isn't difficult to get the funding quickly. There is a bad side of them, though, which are the funding stipulations. They are very strict and prohibit using the funds for cash purchases or credit consolidation.
This form of HUD refinance is more of a change in terms. It is simply a way to obtain a lower interest rate and enjoy lower payments. Unlike some lenders that offer extra money that may be used for other things, FHA does not. After this, find an FHA lender. It is best to work with one that is FHA-direct. The best way to find one is to use a reliable internet search engine. Always review lenders' ratings and reviews before using them, especially if they're not FHA-direct.
Next, verify funding eligibility. FHA loans always have a limit or cap amount that no applicant may exceed, regardless of income. This amount varies from one year to the next, so it is best to ask an FHA lender what the current maximum is. Credit scores must be decent or good to qualify. There should be no judgments, especially any which can result in a substantial lien on the property. The individual debt-to-income ratio should be below 40%.
The last step is to apply for a loan with an FHA lender. Be sure to produce the most recent pay stubs, bank statements, copies of monthly bill statements, a copy of a home appraisal, existing mortgage paperwork and copies of a social security card and driver's license. Bank statements submitted for a HUD refinance application package should include all pages, even if they are extra blank printouts from the bank.