Refinancing FHA Home Loans On Inherited Property

There are many scenarios where a homeowner might find themselves considering an FHA refinancing loan. Some want to tap into the equity of their homes, others want to lower their interest rates. But not all borrowers come into home ownership in the same way. It’s easy to assume that everyone who needs or wants to refinance their mortgages went out and purchased their property--but that’s not the case 100% of the time.

What are the FHA loan rules for refinancing in situations where the loan applicant has inherited property? Is a refinance loan in such cases even available from the FHA? This is an issue common enough to be featured on FHA.gov in its collection of frequently asked questions list.

According to the FHA official site, “A property the borrower has inherited can be refinanced with an FHA mortgage as long as the borrower has legal title to the property and is occupying the property as his/her principal residence.”

Borrowers who aren’t sure whether they have “legal title” to their inherited property should discuss the matter with the executor of the will, or hire a lawyer to learn more about the legal standing of the property and the borrower’s ownership of it.

The FHA refinance policy on inherited homes is good news for homeowners who have inherited and want to refinance--but naturally, the next question is, “What kind of refinancing loan am I eligible to get from the FHA?” There are many options from the FHA; cash out refinance, streamline loans, Home Equity Conversion Mortgages are all programs the FHA offers to qualified borrowers, but what can be done when the property is inherited?

According to the FHA, “An inherited property is eligible for either a cash out or a no cash out refinance, subject to applicable FHA requirements. Because the property was inherited, FHA's requirement that the original sales price be used in the maximum mortgage calculation if acquired less than one year prior to the date of the borrower's loan application will not apply.”

Any refinancing loan application will require the usual credit qualifying data including the borrower’s credit, employment, and income details. Borrowers should expect the same qualification procedures as with any other refinancing loan, and take the same amount of time to prepare for the new loan.

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