FHA Refinancing Help Might Save Some More Home Foreclosures

By Donald Griffith on November 10, 2010, 7:19 am

Real estate is like any other investment in that you never know if it is going up or down. The current decline of real estate prices has caused a stir, but for those who purchased homes for the long term, this decline should be less of a worry. Just as the stock market goes up and down and the long term investors hold on to their portfolio waiting for a rebound, the same should be for homeowners. At least there is always the advantage that homeowners can lighten their burden by refinancing.

Record Low Interest Rates

There are many people who could benefit from these record low FHA interest rates at this time. Homeowners who have current FHA mortgages can apply for a rate reduction or rate and term reduction refinance loan. It is another option for those with underwater mortgages since they can apply for an FHA streamline refinance with no appraisal. With this loan, the new loan amount cannot exceed the original loan amount. Without an appraisal, closing costs must be paid up front or through a no-cost FHA streamline loan, but keep in mind, the no-cost streamline loan will incur a higher interest rate to cover the closing costs. The rate reduction streamline refinance must lower your monthly mortgage payment, but with these low interest rates that should not be too difficult to attain.

Verifying Income

The lender will verify income, employment and assets for closing costs. The current FHA loan must also be in good standing and at least 6 months old. The guidelines are not that difficult as is always the case with FHA loans. In these days, a loan with no appraisal is quite uncommon, except of course, for FHA. Remember, the FHA does not make home loans. They insure the FHA loans that we can assist you in getting. FHA.com is a privately owned website that provides information about FHA guaranteed home loans, and is not associated with the federal government or HUD / FHA.

105%

With the traditional FHA loan program a homeowner can get a fixed rate loan for up to 97% of the current appraised value of their home. Via the new Home Affordable Refinance Program (HARP) homeowners with conforming loans can now refinance up to 105% of the appraised value of their home. By taking advantage of Government Refinance Assistance you could save thousands of dollars on your mortgage payments over the next few years and have the peace of mind of knowing that your home is financed with a low fixed rate. Plus FHA allows homeowners in most states to get a cash out refinance for up to 85% of the current value of the home.

Ameridream

Many lenders don’t allow gifted funds to be used for down payments on a mortgage loan, but a FHA Loan would allow you to do so. This means that you can borrow the down payment from a friend or relative, or use a down payment gift program, like AmeriDream, that will give you the money for a free down payment on your home. If you are refinancing, you would be able to take more cash out from your home, or refinance sooner, even if you have a very small amount of equity built up in your home.

Streamline Refinancing

One streamline refinancing option you have is one that includes the closing costs into the new mortgage amount. This of course is only available if enough equity is in the home after it is appraised. The streamline refinance can occur without an appraisal but the new loan will not be able to exceed the original loan amount. If you are not living in the property(i.e., it is an investment property), the refinance can only occur without an appraisal.

Approval

To be approved for a FHA mortgage, you must have a satisfactory credit history, which shows your commitment to paying off debts in a timely manner. Also, you must be able to prove that the total monthly mortgage payment will be less than 29 percent of your monthly income. The number arrived at after multiplying your total monthly income by 29 percent is referred to as PITI, or principle, interest, property taxes, and insurance. The PITI amount is the highest amount that your monthly mortgage payments may be. Furthermore, long-term debt, such as car loans and credit card balances, in addition to the monthly PITI amount cannot be more than 41 percent of your total monthly income. More information about loan qualifications is available from the FHA.