Conditions for FHA Refund Eligibility

Not everyone is entitled to an FHA refund even though it is meant for those who have FHA-insured loans because several things are looked at before determining whether a refund can be issued. The refund will be available if an individual has financed their house within three years. On the other hand, those whose loans have surpassed the three-year mark cannot be refunded. Similarly, those whose loans are expected to close after three years are not qualified for the refund.

People pay upfront mortgage insurance premiums (MIPs) when they get FHA loans. These premiums will be refunded when they refinance other FHA loans. This happens because the owners are able to receive discounts after the loans are refinanced. Borrowers, therefore, have to refinance other FHA loans to be eligible for MIP refunds.

Borrowers must also exhibit consistency in their loan repayments. Missing any payments will disqualify them from getting the refunds. Foreclosure also disqualifies a borrower from receiving the refunds. Defaulting from paying a mortgage in any way will result in automatic disqualification from the refunds. Therefore, commitment to consistency in paying mortgages is the only way a borrower will be assured of a refund.

Lenders subject upfront premiums that are paid by borrowers on their new loans to FHA refunds. When the original loans expire, the amount of refund that a borrower is to receive reduces by two percentage points on a monthly basis. The refunds are viable for up to six years after the initial loan was granted.

Borrowers are also eligible for FHA refunds when they receive lower upfront MIPs after they refinance into loans that are streamlined by FHA. The FHA refunds serve as ways of discounting loans, and borrowers who receive lower advance mortgage insurance premiums are assured of a discount. However, borrowers will only qualify for FHA refunds after the seven months of receiving loans streamlined by FHA.

There is special treatment for FHA loans that were refinanced before June 1st, 2009. These loans qualify for reduced mortgage insurance premiums of 0.01 percent. In such instances, borrowers will not receive refunds because the refunds will cost more than what their upfront mortgage premiums cost. However, the situation has its merits. Borrowers can save more than they would get from the refund because the average advance mortgage insurance percentage stands at around 1.7 percent.

Borrowers also need to have made six payments on their current loans to qualify for FHA loans or 210 days after the closing dates of their loans. Those who bought their homes within three years can find out whether rates have gone down from the time when they were granted their original loans. By doing this, they can get improved rates on their refinanced loans upon refinancing with FHA loans.

Insurance contracts are not bound to change when individuals sell their homes by presumption. Anyone who makes a purchase of that nature will be ineligible for any refunds. They become eligible only after the termination of the insurance contracts. However, this does not guarantee receivership of cash refunds. Those whose loans were granted over the past five years are eligible for the cash refunds. The refunds were made available for loans granted after 2004.

For borrowers to check their eligibility for refunds, the process is simple: they need to look up the list that is under the maintenance of the Department of Housing and Urban Development (HUD). Borrowers can speed up the process by providing their FHA case numbers to give the HUD an easier task of processing their requests. The HUD also works with a firm, which is tasked with reaching out to homeowners. This firm has tracers who check whether borrowers are eligible for FHA refunds, and their services are billed to the borrowers. The HUD, on the other hand, does not charge anything. Tracers will charge because they are third-party agents and not HUD employees.

These payments are legal given the service that they give. However, paying for this service is not necessary because the HUD usually sends checks after several days. Those who fail to receive theirs after 45 days should contact their mortgage providers. Borrowers should carefully go through all these details to know their eligibility status before claiming FHA refunds.