FHA Refinance

Okay – so here’s something that will stump the loan officer.

You bought a property in Feb. of 2008.  You got a Heck of a Deal – and you purchased the home for $237,000.  The appraisal in February was for $245,000 (and the appraiser thinks it’s worth more now).  The loan in February was a conventional 100% Community Reinvestment loan (those are no longer available).  Your credit is good, you qualify, and since your rate is currently 6.875% – you’d like to refinance.

And maybe you’d like to refinance to an FHA loan, which today is 5.625% with no origination fee, and save over $250 a month on your monthly payment…

Well  –  you have a problem.

Buried in the new FHA guidelines, 702.2… it says:

Property Acquired Less Than One Year.  If the property was acquired less than one year before the loan application and is not already FHA-insured, in addition to the calculations described above, the original sales price of the property also must be considered in determining the maximum mortgage. With conclusive documentation, expenditures for repairs and rehabilitatoin incurred after the purchase of the property may be added to the original sales price in calculating the mortgage amount. (this use to be six months)

And there you have it folks.  If you are refinancing from Conventional to FHA (or USDA or anything else) then you need to have 12 months history owning the property.

Since it’s not really worthy of a post – you should also know that USDA is for purchases only.  Since it’s the only really good 100% program for those of us who are not Vets – figured I’d mention it.