What are the Mortgage Limits on an FHA Refinance?

When a borrower takes out a new mortgage on his or her current property to repay an existing real estate debt, this transaction is considered a refinance. All a borrower needs to be eligible to refinance is possession of legal title.

Maximum Financing

The FHA insures several categories of refinances, including streamline refinances (with or without appraisals) of existing FHA-insured mortgages, “cashout” refinances, and “no cash-out” refinances in which the mortgage proceeds will be used to pay existing liens and transaction costs.

The maximum percentage of financing available on the mortgage will be determined by the home’s state of occupancy, the way the proceeds are used, the date of the property’s purchase and the way it was acquired.

Maximum Term

All refinances with an appraisal have maximum terms of 30 years. Streamline refinances without an appraisal have terms limited to 30 years, or the remainder of the existing mortgage plus 12 years, whichever is less.

Reuse of an Appraisal

An FHA appraisal is valid for six months on an existing property. After the mortgage on which the appraisal is based has closed, the appraisal cannot be used again during the six-month period. Each refinance that calls for an appraisal will require a new and separate appraisal to be made.

Refinance Authorization

For all FHA-to-FHA refinance transactions, the lender will need a Refinance Authorization Number via the FHA Connection or other equivalent service.

“Skipped” Payments

At the time of calculating the new mortgage, the borrower is not allowed to have a “skipped” payment on the existing mortgage included in the new amount. The borrower must either make the payment on time or, if missed, bring the payment to the settlement, so that the mortgage is current and eligible for refinancing.