FHA Home Loan Refinancing

FHA home loan refinancing is an option that helps American families who are in danger of losing their homes by offering them an alternative to foreclosure. The Federal Housing Administration (FHA) was established after the Great Depression and is still operating today, still helping Americans to live the American Dream by furnishing them with options so they can purchase a house and continue to live in their house as long as they choose to. FHA home loan refinancing offers options such as cash out or streamlined refinancing. Building equity over time will make it easier to refinance later. A streamlined option allows the homeowner to refinance without a credit check, income verification, underwriting, appraisal, or even without an application.

Cash out options allow homeowners to use their equity to remodel their home, take a vacation, pay off debts, pay for college tuition, or use the money for anything else they choose. The difference between the value of the home and the actual amount owed against the home is the equity. FHA home loan refinancing gives the borrower an opportunity to not only cash out the equity but to refinance at a lower interest rate which can save a lot of money and many years off the mortgage. Cash out options can be very attractive to those who are deep in debt and need options to get out of debt. Some homeowners may find that they can pay off high interest credit card debt and obtain a lower monthly payment on their mortgage making it easier to meet monthly obligations and may even allow them to put money in savings.

Streamlined options allow the homeowner to refinance without the usual requirements if the homeowner's current loan is through FHA. If a person has a FHA mortgage then he or she will not have to meet the usual guidelines set up to qualify according to debt to income ratios. However, if the current mortgage is with another bank or mortgage company then streamlined options would not be available to the borrower. FHA home loan refinancing will normally require that a person present his or her income in comparison to debts to make sure that debt does not exceed income. The loan officer will normally take the total amount of the monthly house payment and divide that by the borrower's total monthly income to get a percentage. To figure total debt to income ratios include all monthly debt plus the house payment and divide the total debt plus the house payment by the gross monthly income to get a percentage. Most lenders require a percentage of around 40% or less before they will grant an approval.

Homeowners will have to provide some important documents for verification before an approval can be made on a mortgage refinance with FHA. Qualifying for FHA home loan refinancing will normally require that borrower's provide all of the places they have lived over the last couple of years, all employers over the last couple of years, and any addresses and financial information of any other owned real estate. An estimated value of current assets is also required. This includes personal property such as clothing, appliances, jewelry, furniture, and so on. Self-employed borrowers will have to provide their personal tax returns for the last couple of years, and their profit and loss statements for the business.

Mortgage insurance is a requirement with FHA home loan refinancing if the borrower pays down less than 20% on a mortgage. The insurance helps to protect lenders in case of defaults on mortgages. Mortgage insurance can be discontinued after certain requirements have been met by the homeowner. Mortgage insurance is not the same thing as homeowner's insurance. Homeowner's insurance pays for damages or destruction of a home in case of fire, flood, damage caused by wind, and so on. Mortgage insurance is assurance on the mortgage for the lender in case the homeowner does not pay for the home. The insurance is usually a very small percentage of the total loan amount.

FHA does have lending limits on the amount of financing that is allowable and the limits are broken down by state and county. The amounts vary depending upon the type of home. If a homeowner chooses to refinance a mortgage and the total loan amount is over the allowable limit then an FHA home loan refinancing will probably not be feasible. More than likely if a homeowner has a current FHA mortgage he or she should not have any worries when it comes to qualifying for a refinance because they would have been qualified by the first mortgage amount and the amount owed should be much less than it was originally. "The wicked borroweth, and payeth not again: but the righteous sheweth mercy, and giveth" (Psalm 37:21).

Down payment assistance may be something that homeowners can qualify for with FHA home loan refinancing. The criteria that must be met to qualify for assistance includes a good work history, good credit, and the home must be appraised for what the mortgage price is. The buyer and the lender must apply for the program in order to gain approval for the borrower. The buyer must agree to use the funds solely for the purpose of the down payment and the lender must agree to pay all closing costs. The requirements for approval through down payment assistance programs include a maximum dollar amount for both closing costs and down payment. Exceeding this set amount could cause a buyer to be turned down for assistance.




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