When a refund is issued for a mortgage loan that is FHA insured, it is called an FHA refund. There are a variety of factors that affect the amount a person will receive for their refund. One of these factors is if you have financed your home within three years of the beginning of your loan. This means these refunds are available for loans that have been opened in the past three years. If your loan closes following this period, you are no longer eligible to receive an FHA refund.
When they begin an FHA loan, people typically pay a mortgage premium. This premium is referred to as the upfront mortgage insurance premium or MIP/UFMIP for short. If you refinance a different FHA loan, this mortgage premium becomes refundable. This helps borrowers get a discount when they decided to refinance their loan.
To be eligible to get a MIP refund, you must first refinance a different FHA loan. If you miss payments or enter foreclosure, you are no longer eligible to receive the refund. This means it is crucial to stay consistent and make your payments on time. If you default on your payments, you are automatically rendered ineligible for a refund. The refund is directly applied to go toward the upfront mortgage insurance premium you are responsible for paying on your new loan. Each month following the closing date of the initial loan, the refund is reduced by two percentage points. There is a six year period to claim the refund. After the expiration of this period, no refunds will be issued.
When you decide to refinance into an FHA streamlined loan, you are not eligible to get the refund if the upfront mortgage insurance premiums have been decreased. The refund serves as a discount on this new loan. If a decreased upfront mortgage premium is offered to you, you are already guaranteed a refund. Once the mandatory seven month period is over, FHA streamline refinances are eligible for the MIP refund.
The MIP can be reduced by 0.01 percent for FHA streamline refinances opened prior to June 1st, 2009. In these cases, borrowers are not eligible to get a refund since the amount of the refund would be higher than the cost of the upfront mortgage premium. This is advantageous because 1.7% is the typical percentage of the upfront mortgage premium. This can end up saving a borrower thousands more than what they would have received from a refund. To qualify for an FHA streamline, one must make at least six payments on their current loan. A borrower can also qualify after 210 days have passed since the loan has closed. It might help to double check to make sure rates have not dropped if you bought your home in the past three years. If you have, refinancing with an FHA loan may help you earn a refund and better rates on your loan.
If the home is sold by assumption, the insurance contract stays in place and no refund is issued. The owner of the home will be eligible for a refund once the insurance is eliminated. The next issue to determine is whether you can receive a cash refund. Cash refunds became an option for all loans that were opened after 2004. It is simple to see if you qualify to receive a refund - simply check the list maintained by the Department of Housing and Urban Development (HUD). To help your request be processed faster, it is beneficial to have your FHA case number ready.
The Department of Housing and Urban Development has also hired a company that gets in touch with homeowners. Tracers can be paid to help determine if you are eligible to receive a refund. The HUD team will not charge you for their services - any company that collects a fee is a third-party. Paying a fee is no longer necessary even though third-parties that collect fees are still legal. Typically, the HUD sends out a refund check in just a couple of days. It is best to touch base with your mortgage provider to see if they have reached out to the HUD if you have not received your refund within a 45 day period of paying the loan. It is important to observe the details and information closely prior to claiming your refund.
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