If you’re thinking about refinancing an FHA mortgage, here are five tips that will help you avoid common mistakes. These tips are particularly valuable if you have less than stellar credit. Also known as FHA home loans, these loans were created to help homeowners who qualify for traditional loans but who have low credit scores. These loans provide a solid opportunity to improve your credit rating.
Before beginning the process of refinancing an FHA mortgage, it is important for you to understand exactly how the system works. You can refinance an FHA mortgage, and in general there are a variety of Fha refinance choices for you to choose from. Each individual type of refinance comes with slightly different criteria, but the basic guidelines are similar to typical FHA buy down mortgage terms. The major difference between these mortgages is the lower interest rate on the loan. Because many low credit score homeowners are eligible for these mortgages, they carry low interest rates and are ideal for first time home buyers.
One way to refinance an FHA mortgage is to get into what is called a streamline refinance. Streamline refinances involve taking out one loan to pay off several other loans. By selecting one of these streamlined repayment options, homeowners reduce the overall monthly payment amount by refinancing the loan and paying off all the loans involved. While this may be the preferred method for you, there are a few disadvantages that you should consider.
A streamline refinance often involves a transfer of debt onto the homeowner’s new mortgage insurance policy. Your original loan may require that you obtain mortgage insurance coverage as part of your refinance process. When you choose a streamline refinance option, however, the insurance will not typically be required. If you do choose to include this coverage, however, it will most likely be at a much higher cost than it would be for a traditional FHA mortgage.
You can also qualify for an FHA refi, but you may need to supply additional documentation on your income and assets. Once again, if you are considering an FHA refi due to current issues with your credit, you may not be able to read with the current refinancing options available.
In addition, if you are currently facing foreclosure or think it is quite possible that you will experience such a circumstance in the near future, you should seriously consider a FHA loan. If you are interested in finding out more about FHA home refi programs, you should consult your nearest VA lender or call the FHA hotline. You can also find valuable information by visiting the website for the National Foundation for Credit Counseling.
Another benefit of an FHA refi is that you will not have to worry about dealing with the complexities associated with home appraisal or closing costs. These fees are charged when selling a property and can be quite high. Additionally, homeowners who are facing certain financial hardships may not have adequate funds available to cover these fees. In order to avoid the high cost of these fees, an FHA refi can be a good solution. The only thing to remember is that the lender must approve your application. If you find that this approval requirement is too strict, it may be best to wait until your loan has a little bit more time left on its maturity date.