Refinancing an FHA loan is only an option for those that have a current FHA contract. The FHA (Federal Housing Administration) is a government-run company, and it was established in 1934 to help improve housing conditions and standards for all Americans. Refinancing an FHA loan is geared toward those who are buying a home for the first time, minorities, those with tarnished credit, and those that don't have a sizable down payment to offer. Refinancing an FHA loan is done by the streamline finance process.
The FHA helped to bring about the long term amortizing loan, and therefore, home ownership rates are at about two-thirds. Qualified borrowers will find that the FHA refinance has a lot of advantages, such as no cost reduction of interest rates. If you apply for an FHA refinance, there are minimal credit and income requirements to be met, and you may have the option to refinance at zero cost. Borrowers can also choose from an adjustable or a fixed rate loan, allowing them to lengthen or shorten the term of the mortgage they already have.
Using a government sanctioned refinance offers another big benefit. Borrowers can get up to 97% of their home's value, and an FHA refinance will also make them eligible for a cash out refinance, which means that they can get up to 85% of their home's value in cash. This program also allows the homeowner to combine their first and second mortgage into one monthly payment; closing costs are regulated by the FHA so they are lower, and most loans come with a bill consolidation program.
Applying for an FHA refinance can make a difference in the borrower's monthly payment and can greatly lower the interest rate they will pay over the life of the new loan. A smart shopper can save thousands, and these programs are also available to those who have had a foreclosure three or more years ago. When considering an FHA refinance, get all the information as well as the pros and cons before you make your decision.
