FHA Refinance Loans for Lower Rates, Cash Out and Bad Credit
Over the last seven years, FHA has been the leading lending product for mortgage refinancing. People like FHA refinance loans because it's easy to qualify for a low fixed interest rate on 15 and 30 year terms. FHA refinance mortgages extend opportunities to people with bad credit who need a fixed rate or improved term from refinancing their home. According to the refinance mortgage loan blog published by BD Nationwide, "FHA refinancing is the best opportunity for homeowners to lower their payment monthly without damaging their credit with a loan modification or forbearance. The FHA 203b was introduced for cash out refinancing and the 203k was created to help people finance rehabilitation and significant home improvements. Read more about FHA Home Loans for People with Bad Credit.
FHA Makes Subprime Better with Low Interest Rates and Easier Credit Guidelines with FHA Refinancing
With conventional lenders tightening their belts on their lending requirements, subprime loans are pretty much a thing of the past. This leaves a lot of current holders of subprime loans very few options to avoid foreclosure when their rates reset. However, the FHA has stepped up and is currently assisting subprime borrowers by allowing them to refinance to fixed-rate FHA loans that have low rates.
National Mortgage News reported last month that Federal Housing Administration-insured loans have gained a market share greater than 10 percent, a big jump for an agency overshadowed during the housing boom. "Since September 2007, FHA has helped pump more than $76.1 billion in mortgage activity into the housing market," FHA Commissioner Brian Montgomery said. That figure includes $30.3 billion of loans to conventional borrowers who refinanced into FHA loans to avoid a huge jump in their mortgage payments when their old loans reset.
Should I Get a Mortgage Refinance with FHA?
"The unfortunate truth is that many consumers have been trying to outguess the market, waiting for it to hit bottom, but now find themselves in the unenviable position of missing the most recent interest rate low water mark. Trying to outguess the market is a losing proposition. Consumers should instead set a rate at which they feel it is equitable to get into the market, and when rates hit that point, jump in. The beauty of mortgages is that if rates fall, those consumers can always refinance and save money, while enjoying the comfort and security of a fixed rate in the meantime," says Quicken Loans Chief Economist Bob Walters.
On Jan. 1, 2009 the temporary $729,750 limit on loans in high-cost markets that can be insured by the Federal Housing Administration or purchased by Fannie Mae and Freddie Mac will DROP reverted back to $625,500, but Congress has made the increased FHA loan limits permanent for 2010. In 2013 Congress left the FHA limits at the previous year's level. Borrowers that live in high cost areas can still get affordable rates with a FHA mortgage refinance.
Even if you're not facing foreclosure, you could probably end up paying a lower interest rate through FHA and possibly be able to roll your second mortgage into a single mortgage and get fixed rates with FHA. With a FHA mortgage refinance, there is no pre-payment penalty. Years ago, FHA allowed 95 percent loan to value for cash out transactions, but that has changed to 85 percent loan to value. That means that homeowners will need at least 15% equity in their property for cash out with a FHA refinance loan. Rate and term refinancing is still allowed on FHA refinances up to 96.5 percent loan to value.
And, while FHA recently introduced some FICO credit score requirements, they are still much more relaxed than those of Fannie Mae and Freddie Mac. FHA still allows bad credit refinancing, but they are in the process of implementing risk based insurance.
Now is the time to refinance into a mortgage because FHA rates are low and high balance loan amounts were once again extended in 2013. FHA Secure, one of two foreclosure rescue programs expired on December 31, 2008, but the Home Affordable Refinance Program has opened the door for more homeowners to refinance. You'll still be able to refinance under the second foreclosure rescue plan, HOPE for Homeowners, but you'd have to share your equity with FHA.
For people considering a FHA refinance loan, they need to understand the costs associated with this government loan. These mortgages have two charges: 1. an annual mortgage insurance premium that's incorporated into the monthly payment. 2. There is also an upfront charge for the insurance premium that must be paid at the time of closing. For borrowers seeking to renegotiate the terms of their current FHA lien, the amount of the charges depends upon the age of the lien to be refinanced.
Breaking News - The Federal Housing Administration announced a new FHA mortgage for people with bad credit may have a new opportunity. Rather than hold borrowers to 3-years before re-applying for a FHA refinance or purchase, applicants only have to wait 1-year if they can document over a 12 month period that they have rebounded financially and mad their payment on time. HUD calls this the, FHA Back to Work Loan that was designed as an outreach to Americans that have extenuating circumstances and hardships. This FHA mortgage refinance for bad credit enables consumer that lost their houses due to financial hardships to be eligible for a government insured house loan or refinance quicker than in the past.
FHA mortgage refinance rates displayed are subject to change available loan information can provided by the mortgage lenders directly after application is submitted for further underwriting review. The FHA Mortgage Refinance Loan Company is not directly affiliated with any government agency. We provide an online marketplace for consumers searching for FHA loans and HUD resources. We help people shop with HUD approved FHA mortgage lenders. If you would like to contact HUD directly please visit their website online.
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