Refinance Loan Terms And Conditions: What You Should Know!

What happens if you skip a payment on a VA or FHA refinance loan? What about situations where you don’t meet the terms of your loan agreement on an FHA HECM loan? These are important question to ask going into any loan agreement--knowing the penalties for not meeting loan terms is a major part of being an informed borrower and can help you avoid fees or other costs associated with missing payments or not living up to your loan agreement.

For VA home loans and refinance loans, the terms can be quite simple in some areas and in others it may depend on the lender’s standards. For example, when you buy a home with a VA mortgage, you are expected to take residence in the home within a certain time after the loan closes, usually sixty days. If you expect a delay in this regard, you will be required to work out the situation with your loan officer, but in any case a borrower may not delay occupancy of the home after the loan has closed for any longer than 12 months.

The occupancy rule is similar for VA cash-out refinance loans; you must continue or begin occupancy of the home being refinanced as your primary residence as a condition of loan approval. For VA Streamline Refinance loans, the rule are different; this type of VA refinance loan only requires you to certify that you previously used the property as your primary residence. In other words, you cannot refinance a home that was not your primary residence under the original VA loan.

FHA new purchase loans and cash out refinancing also have an occupancy requirement which must be met in order to get the loan approved. For FHA Home Equity Conversion Mortgages, however, there is a different set of concerns. Those familiar with FHA HECM loans know that these mortgages feature no monthly payment and only become due once the borrower dies or stops using the home as the primary residence.

But with FHA HECM loans a borrower is required as a condition of loan approval to also stay current on all property taxes and other required payments. A borrower could find his or her FHA HECM loan due in full if these payments are not made, or if the home stops being the primary residence for the borrower. That means it is crucial to stay on top of these payments and to insure the home continues to be the main place of residence.

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