If you are looking to refinance and want the best rate and terms with an easy process with more favorable guidelines, an FHA loan is definitely a loan that you should consider.
When it comes to refinancing, there are basically 3 main reasons why it would benefit you to refinance your existing mortgage:
- You are in an ARM (Adjustable Rate Mortgage) and would like to be on a fixed mortgage.
- You would like to take cash out of your home equity for debt consolidation, investing, or for any other reason.
- Your current mortgage rate is too high and you would simply like to lower your monthly mortgage payments.
Of all the different mortgage programs out there, FHA fixed rate loans are the most popular programs for refinancing because they have stable predicable payments each month, and as a result, this offers the most security for yourself and your family as opposed to other types of loans that are more risky.
Regardless of the type of FHA refinance, it’s very straightforward and much like other types of refinance loans.
In fact, both loans require almost identical paperwork unless you are going the FHA Streamline/Appraisal route.
The entire process generally takes no more than 30 days.
One nice advantage of refinancing is that you are allowed to skip one month of your mortgage payment after you close.
And if you time it right, depending on when in the month your mortgage closes you can possibly not make the current mortgage payment and skip the following month as well.
How FHA Interest Rates Work
FHA mortgage rates are likes stocks – sometimes they go up, while other times they go down.
Regardless of what you read in the paper or see in the news, there are 2 main factors that can change rates at any given time:
FHA Streamline Refinance
An FHA Streamline refinance is simply for homeowners that already have an existing FHA loan on their homes that are wanting to refinancing into another FHA loan.
The reason that it is called an FHA Streamline is because:
- You do not need to get an appraisal done.
- There are no credit score restrictions.
- Your income and employment are not evaluated.
How the FHA Streamline Refinance Works
One of the biggest confusions of the FHA streamline program is if you need to have an appraisal done on your home.
Here’s an easy way to make sense of it all:
If you’re not worried about your home’s value and do not want to pay anything out of pocket, this is the best option.
If you are somewhat worried about the value of their home and can afford to bring some money to closing (usually equal to your current mortgage payment) while not increasing your loan amount, then this is the best option.
The appraised value will either be based off of your original purchase price (when you bough the home) or your last FHA appraisal amount.
Many homeowners that are underwater due to the economy that choose this option can still end up saving a ton of money.
FHA Streamline Requirements
There are only a few requirements to obtaining an FHA Streamline loan, they are:
- You must have been in your current FHA loan for a period of at least one year.
- Your current FHA loan must be current at the time of closing the new FHA loan.
- The new FHA loan must offer a lower payment or shorten the term without increasing your payment by more than $50.
- If current FHA loan is an ARM, and the new loan a fixed, the interest rate on the new fixed loan may not be more than 2% higher than that of the ARM.
It is always a good idea to get in touch with us and find out the latest rules since FHA guidelines always change. We’re happy to help guide you in the right direction and our advice is always free!
Does Refinancing Make Sense?
Making sure that your goals are being met is the very first step when it comes to refinancing your current mortgage.
Finding out if a refinance makes sense for you takes less than 30 seconds – we’re happy to help put some numbers together for you so you can make a good money-saving decision.