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CLEVELAND, OH: Recent HUD changes could be extremely useful to FHA homeowners, a new report says. The changes, which alter the “net tangible benefit” rules for FHA loan refinancing, could mean that certain homeowners might now be eligible to reduce their FHA mortgage terms when they couldn’t under the old rules—thus saving them a lot of money in payments and interest over the life of the loan.

The changes, which allow homeowners with FHA loans to refinance into a new, shorter FHA loan, are something that couldn’t be done just months ago.

NLC Loans’ Brandon Feikle says that while the changes are seemingly minor, they could mean a savings of tens of thousands of dollars just with a simple FHA refinance. “When it comes to their homes, a lot of people tend to forget to pay themselves and end up lining the pockets of the banks instead of their own,” he said.

Feikle compared the potential savings FHA mortgage holders could see from a simple term reduction to a few cups of designer coffee a week. A recent report says that the average American spends about $62 per month at coffee houses — “a number that can really add up if it were to be applied to an FHA mortgage instead of a latte budget,” he explained.

“Once we show [homeowners] how much they could be saving if they were just to cut down their coffee habit by a few drinks a week, they realize what a bitter ending it is to sink so much cash into something that does nothing for them except drain their wallets,” he said.

FHA rule changes now allow FHA loan holders to refinance their existing loans into shorter terms when they meet the guidelines of what the FHA refers to as a “net tangible benefit”. In other words, in order for the FHA to approve the refinance, the lender must prove that the refinance is going to help the homeowner save money either immediately, or in the future, by reducing the mortgage term.

In addition, homeowners who are currently in adjustable rate FHA mortgages, or ARMs, will now be able to refinance into a fixed rate FHA loan in most cases.

Under the new rules, FHA homeowners can now get an FHA streamline refinance loan just by showing that there is a benefit to decreasing the loan term; something that was excluded in the past.

For more information on HUD FHA Mortgage Limits in your area. 

To see if you might qualify for an FHA streamline term reduction under the new FHA guidelines, call a NLC Loans personal mortgage advisor toll-free at (877) 480-8050 or submit an inquiry.