• A FHA refinance is possible after foreclosure with proper documentation.Documents image by GHz from Fotolia.com
  
  The Federal Housing Administration insures mortgages for home purchases as well as refinances. A refinance loan pays off an existing mortgage with the proceeds of a new loan, according to FHA guidelines. FHA refinance loans are available to homeowners who have experienced a past foreclosure. They must met certain eligibility requirements and FHA makes certain exceptions for some borrowers.
  
  

Foreclosure Seasoning

• If during the previous three years, a borrower's principal residence or other real property was foreclosed, they are generally ineligible for FHA financing, according to the FHA Handbook. Borrowers must wait at least three years before applying for any of FHA's refinance programs, which include the streamline, rate and term, and cash-out. An exception to the three-year waiting period applies to borrowers with extenuating circumstances. They may refinance with an FHA-insured loan sooner if they can provide documentation that a wage earner on the defaulted loan died or became severely ill, leading to the default. A divorce or inability to sell the home for the purpose of a job relocation are not considered extenuating reasons for foreclosure, according to the FHA Handbook.
  
  

Credit Re-establishment

• A borrower with a foreclosure more than three years old must have re-established good credit in order to qualify for an FHA refinance. FHA lends to borrowers with low credit, but because of the increased risk of insuring a loan for a person with a tarnished credit history, FHA requires above average credit. According to FHA Home Loans, FHA will insure your loan, "assuming that your credit since the foreclosure has been perfect." A strong credit history over the past three years also demonstrates the borrower "has the ability to devote a greater portion of income to housing expenses," says the FHA Handbook. FHA accepts FICO scores as low as 500, but in general, 680 is considered a good credit score, says Bad Credit Advisor. The borrower should have no 30-day late payments, judgements or liens since the financial difficulty. A proper debt-to-income ratio after foreclosure is 31 percent of the borrower's gross income, according to the FHA Handbook.
  
  

Eligibility

• In general, FHA insures loans on primary residences only, not on investment properties. Manufactured homes, single-family and two- to four-unit properties are eligible for FHA refinance. Except for the rate and term refinance, only homes with FHA-insured loans can be refinanced through FHA.