While obtaining a mortgage to purchase a condominium may present an interesting challenge because of the required project approval on the Home Owners Association (HOA), refinancing a condo could be easier than you would think.
If you have an existing government loan, either FHA or VA, project approval is not required for either a Federal Housing Administration (FHA) “streamline” refinance or VA Internal Rate Reduction Refinancing Loan (IRRRL). Both loans are designed to help people refinance to either a lower interest rate or change from an Adjustable Rate Mortgage (ARM) to a fixed rate mortgage. These loans do not allow for taking cash out. While both FHA and VA mortgages do have programs to provide for cash out, the standards are higher, and will include project approval and other criteria such as an appraisal, full income documentation, etc.
In addition to not requiring project approval for a VA or FHA rate reduction refinance, an appraisal is usually not required. Credit score requirements are reasonable, and debt to income ratios are not a factor in qualifying. In most mortgages, closing costs may be rolled into the new mortgage. A caveat I must mention is that borrowers should closely examine how much is being rolled into the loan. I have seen predatory lenders roll costs into a mortgage that would take the borrower over 15 years to recapture. The borrowers were so focused on rate that they forgot that the interest rate is only half of the equation. Rate and fees are what counts.
Next week I will discuss refinancing a condo that has an existing conventional mortgage. Your comments and questions are always welcome.
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