When Can You Claim an FHA Refund?
- Author: Chris Remington
- Posted: 2023-12-03
People pay mortgage premiums when they get FHA loans, which are called upfront mortgage insurance premiums. Such a premium is usually written in abbreviation as MIP/UFMIP. The premiums are generally refunded when the borrowers refinance other FHA loans because it enables the owners to receive discounts when they refinance their loans. This means that borrowers must refinance other FHA loans to qualify for MIP refunds. There are also other determining factors.
The borrowers must consistently repay their loans because missing some payments disqualifies them from receiving the refunds. Entering a foreclosure also makes a borrower ineligible for the refund. All borrowers who default on their mortgage payments are automatically disqualified from receiving refunds, which means that borrowers must be faithful and consistent with their repayments.
Lenders apply FHA refunds to the upfront insurance premiums that borrowers pay on their new loans. When the closing dates of the original loans reach, the amounts of refunds that borrowers are eligible for reduce every month by two percentage points. The borrowers can receive refunds within a period of six years from the date of the original loan.
Another factor that determines whether borrowers can receive FHA refunds is when they get lower upfront mortgage insurance premiums when they refinance into FHA streamlined loans. FHA refunds act as methods of discounting new loans, but borrowers who get lower upfront mortgage premiums are already guaranteed discounts. However, the borrowers can qualify for FHA refunds once the mandatory 7-month period expires after receiving FHA streamlined loans.
FHA streamlined loans that were refinanced prior to June 1, 2009 qualify for reduced MIPs of 0.01%. In such cases, borrowers do not receive refunds because the refunds would be more than the cost of their upfront mortgage premiums. Considering that the average upfront mortgage insurance percentage is about 1.70%, the situation has its benefits. Borrowers can save more money than they would receive from the refunds.
Borrowers qualify for FHA streamlined loans after they have made six payments on their current loans or when 210 days have passed from the dates of closing their respective loans. Borrowers who purchased homes within three years can check whether rates have dropped since they took their original loans. In such a situation, refinancing with FHA loans can help them get refunds and better rates on their refinanced loans.
Insurance contracts do not change when people sell their homes by assumption. Buyers making such purchases do not receive any refunds. The owners become eligible for refunds when the insurance contracts are terminated. However, that does not necessarily mean that they will get cash refunds. Borrowers whose loans were opened within the past five years are eligible for cash refunds, and the refunds were availed for all loans opened after 2004.
It is easy for borrowers to check whether they are eligible for refunds: they just need to check the list maintained by the Department of Housing and Urban Development. The HUD will have an easier time processing the requests of borrowers who provide their FHA case numbers, speeding up the processes.
In addition, the department has hired a firm that is concerned with contacting homeowners. There are tracers who check whether borrowers are entitled to FHA refunds, and the borrowers are required to pay for their services. However, these are not employees of the Department of Housing and Urban Development but third-party agents. HUD employees do not charge any fees.
These third-parties are legally allowed to provide the services, but paying a fee to check eligibility for an FHA refund is not really necessary. HUD sends checks within a few days. Those who do not receive checks within 45 days of paying their loans should check with their mortgage providers.
Borrowers need to keenly observe all the details discussed before claiming refunds.