Why Is FHA Loan Refinancing So Difficult

by Tracie
(Maryland, USA)

Ask Kate why is FHA Loan Refinancing so difficult: Kate, I'm trying to refinance my house for the fourth time over a 23 year period. I realize that the price of homes are really down.

Tracie continues...But we paid $350 for the FHA appraisal which came in at $154,500 which according to our lender would have allowed us to also get $5k cash out.

Now the lender is saying they are not going with the appraisal and dropped it down to $140k and we cannot get any cash out. We currently owe $113k on our 1st and only FHA loan. Why are we not eligible for cash out?

Why are they asking for all kinds of very personal information including the custody that I've obtained of my grandchildren. They actually want to see court documents and quarterly 401k statements.

I had to write a very detailed letter as to why we were late several times on our mortgage payments, in the past going all the way back to 2007? We have never had to provide this sort of personal information during our past refi's so why now? HELP please!!! Thanks, Tracie

Kate Answers: Why Is FHA Loan Refinancing So Hard

Hi Traci, No matter how you cut it, most FHA loan lenders are going to think that 4 refinances in 2 years is too many. Why, you ask?

As they might term it, excessive refinancing of a home is often indicative of financial instability, especially any refis with cash proceeds.

$5000 might seem inconsequential to you, but to a lender your FHA refinance is now in the riskier category of cash-out.

Tell Your Story

Now this may not be the case at all. But understand a lender has nothing but a pile of bank statements and pay stubs to form their decisions.

So if there is more to your story, tell it! Tell why you are a good financial risk. Explain the reason for 4 refinances in 24 months.

FHA Loan Requirements

As far as asking for custody agreements or 401k statements, FHA loan requirements in general are tougher when the flow of money is restricted, say from a recession, and especially combined with declining home values.

Or it could be your qualifying criteria is on the edge and the underwriter reviewing your loan application is looking for ways to justify a decision.

Mortgage Approval Hiccups

So discuss this all with your mortgage professional. Offer your assistance and hopefully your mortgage approval is around the corner. If your loan representative understands you are willing to roll up your sleeves and pitch in to help, he or she may be more apt to ask you for help in overcoming obstacles standing in the way of your refinance.

I suggest my article, How To Cure Mortgage Approval Hiccups for more assistance.

Comment and Link To This Page

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Have You Seen The Most Recent Ask Kate Answers

• Special Edition Making Home Affordable Options
• The Bad Behavior of Making Home Affordable
• How To Refi Without The Glitch

Best wishes,




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