If you are planning to refinance your FHA mortgage, but do not know what to do next, then read on for some FHA refinance Tips that can help you. FHA stands for the Federal Housing Administration. It is a government agency that provides mortgage refinancing and home loan modifications to qualified borrowers. You can apply for refinancing at your local bank or one of their accredited lenders; the list is extensive and can be very confusing.
The FHA refinance is one of several options available through the FHA program. An FHA refinance is a refinancing of an FHA loan where you change either the interest rate or other terms of your loan. FHA is short for the Federal Housing Administration, which is a part of the U.S. Department of Housing and Urban Development.
An FHA mortgage refinance does not have to be a traditional refinance – you can also opt for a streamlined refinance, a “second chance” refinance, or a mortgage rate decrease. As an FHA mortgage is traditionally guaranteed, you can save by choosing this option and still receive the lowest FHA rates possible.
When you refinance your FHA loans, you can get lower FHA REFINANCE RATES than if you applied for a conventional private mortgage. Some lenders also offer guaranteed interest rates if you choose to use them; however, you may not have as good of a choice in terms of loan types as if you went with a bank. Private mortgage loans generally have much stricter guidelines and can involve a lot more paperwork; it is also impossible to choose your interest rate. FHA loans are backed by the FHA, so it is easier to obtain a competitive interest rate.
Current Refinance Rates Many people mistakenly believe that the current interest rates on FHA loans will never change because they are guaranteed. However, as is true with many things in life, the truth is that rates are subject to change periodically based on several factors.
If interest rates have been increasing for several months, you may want to consider a second mortgage to pay down your debts faster. You may also consider waiting and checking out the current market to see if the rates will go down. The bottom line is that there is always a time to refinance your FHA loans, whether you are trying to avoid foreclosure or you just need to lower your monthly payments.
Your Credit Score If you have poor credit, you can still qualify for FHA refinance rates, but the interest rates will generally be higher than they would be for a more conventional mortgage. To improve your credit score, you can contact the lender and request that your current credit report is amended.
It is important to make all of your payments on time so that your credit score will increase over time. If you have had problems making payments in the past, you can work with the lender and pay off some of your debts to improve your credit score. A bad credit score will often prevent you from qualifying for traditional mortgage rates.
Your Down Payment If you qualify for lower interest rates, your monthly payments will be much lower when compared to what you would pay on a conventional mortgage. Usually, a thirty-year fixed-rate loan will cost you twenty-five percent of your gross monthly income, or about ten percent of your total income. If you owe more than twenty percent of your income to your lender and if you own your home, you can reduce your mortgage rates by up to twelve months by paying down your debt. You can use the money you save on your down payment to reduce your overall debt and reduce the amount you pay every month towards your mortgage.