Federal Housing Association (FHA), can help any new or experienced homeowner in purchasing the perfect home to suit their needs. An FHA Loan can help people with average earning incomes with the ability to purchase or refinance the home of their dreams, without having to make an obscene amount of money to qualify.
An FHA Loan is a government program which protects the lender if the borrower defaults on the loan, making it less of a risk for lenders to take a chance on newer home buyers. There are, however, stipulations and rules that must be followed and qualifications that must be met in order to qualify for FHA assistance in refinancing your mortgage.
FHA Loans are not technically loans, but repayments to the lenders to give them peace of mind about being repaid for their loans and giving you an easier time to repay it. And while you need to be able to make the mortgage payment, with an FHA loan you can use up to 41 percent of your pre-tax income on other bills or debts you may have, such as car payments or credit card bills, or any other type of debt or bills you may owe each month.
In a non-FHA loan, you can usually only use 36 percent of your pre-tax income on other things. If your credit score is high and you have really good credit history, they may stretch it to 43 percent, but you must still keep track of your spending, just in case you are too near to your allowed spending.
Think an FHA Home Refinancing Loan could be the solution to your home refinancing problems? Here are some things to consider before you go and apply:
There are two types of FHA Home Refinancing for you to consider when contacting the FHA for your needs:
The first one is FHA Cash-Out Refinancing, which is especially beneficial for those who own houses which has increased in value during your stay in the home. Cash-Out allows you to take out a second mortgage for more than you currently own, to help you refinance what you owe.
The second one is FHA Streamline Refinancing, which is much simpler and easier than FHA Cash-Out Refinancing, as it requires less paperwork to be completed by you and the lender, cutting down on the time and effort spent refinancing your mortgage. Streamline Refinancing helps you cut down on your current interest rate without having to get an appraisal for your home. This method is usually the faster of the two, and the most effortless.
Regardless of which type you decide to go for, the qualifications and restrictions are the same and are addressed below.
While getting approved for an FHA Home Refinancing Loan is generally easy to do and qualify for, here are some things that could affect your eligibility for the loan, and must be considered:
You do not need outstanding credit to qualify for FHA Home Refinancing, but if your credit falls below 580 the usual down payment of 3 percent can increase up to potentially 20 percent, so it is best to get into loan discussions knowing your credit score.
Even if your credit score is low, there are individual lenders that are willing to assist you. You might have to pay a higher down payment or accept a higher interest rate, but as long as your credit score is higher than 520, they should be able to work with you to suit your needs.
If you are struggling to acquire the down payment, state and local programs are out there that could assist you. It is imperative for you to do research about the types of services out there that could help you come up with the down payment.
In order to qualify, you need two years of on-time bill payments, and two years employment history to establish your credibility for the loan. Less than that could disqualify you from eligibility for the FHA refinancing loan.
One stipulation is that you can only use an FHA Home Refinancing Loan on your current primary residence. Secondary residences, vacation homes, or investment properties are not eligible for the loan.
Also, you must carry homeowners insurance for as long as you own the home. Some private mortgage companies allow you to drop your insurance after a period of time, but that does not apply to an FHA loan, and insurance is required for the entire duration of owning the home.
You must also pay the mortgage insurance at the time of signing, and the average amount is 1.75 percent. That can be added to the mortgage loan, or paid in full. Regardless of your down payment amount, you still must pay the mortgage insurance when you are completing the deal.
While an FHA Loan is usually a good fit for everybody, there are some things that disqualify you from being able to apply for one. Be sure to be aware of the things that disqualify you before deciding to try to get a loan.
First of all, you must not have had a foreclosure within the past three years, or a bankruptcy within the last two years, as this makes you ineligible to take out any loans until your repayment period is up, as per the laws and agreements surrounding foreclosure and bankruptcy.
Secondly, you cannot have any current or past delinquency with student loans, back taxes, or federal debt, as this disqualifies you from the ability to take out an FHA Home Refinancing loan.
If none of these apply to you, then an FHA Home Refinancing Loan could be the solution to your home financing problems. Hopefully, you now have a better understanding of the types and requirements for FHA Home Refinancing and can go ahead with your refinancing plans.
Please feel free to contact us with any additional questions regarding your FHA Home Refinancing Loan. We are happy to assist you in coming up with the perfect mortgage refinancing plan to suit your needs, FHA or not.