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Loan Product Content: FHA Refinance Loan

For many Americans who are first-time home buyers, availing an FHA loan is a go-to move. It’s specifically made for those who have a weak or damaged credit history. If you have a fair credit score rather than excellent, then this one is for you too.

Loan Product Content: FHA Refinance Loan

  1. What is an FHA refinance?
    Federal Housing Administration or FHA is part of the US Department of Housing and Urban Development. It’s a loan category that started in the 1930s which was meant to boost home sales in the country. The US government doesn’t offer the loans, but it’s the one that insures them.If you can put down less than 20% of your down payment, then the FHA refinance rates and loans might be your choice. Given this rate, FHA mortgage holders need to pay into the mortgage insurance fund run by FHA.
  2. What to expect from FHA refinance rates?
    Both 20-year and 30-year conventional mortgage rates and FHA refinance rates offer fixed and variable- rate mortgages. Their interest rates vary based on the lender, your credit score, and the current market.
    Regardless of what loan option you pick, you also need to cover all the expenses associated with your mortgage such as:
    • HOA fee
    • Mortgage insurance
    • Homeowners insurance

    When all of these things are put into consideration, the lender can then identify which loan fits comfortably into your budget.

  3. Who can benefit an FHA loan?
    As low as 3.5% of the total loan amount is the usual minimum down payment. That’s why borrowers who have lower or low-established credit are best for this one. But note that there are down payment loan assistance programs available too that can help you reduce the total closing costs.
    • FICO® score between 500 and 579 = 10% down payment
    • FICO® score at least 580 = 3.5% down payment
    • Debt-to-Income Ratio < 43%.
    • MIP (Mortgage Insurance Premium ) is required.

    The property must also be your primary residence, and you need to have a steady income. Your proof of employment is also necessary.

  4. Takeaway: Weighing your FHA Refinance Cost vs. Save
    Certain factors like FHA refinance rates and what type of product you choose can affect how much you stand to save.Refinancing into a short-term product with a lower interest rate can help you save on interest costs throughout the life span of the loan.This situation might sound scary for most people since it will imply that the monthly payments are higher.Now, if you’re aiming to lower your monthly payment, it’s most beneficial to do it in the first three to five years of the home loan. Then restart the clock with a similar length of the term into another 30-year mortgage with only 20 years left.Timing is crucial when it comes to availing any loan type. When it comes to FHA refinance loan, make sure to shop around before settling down in one lender. Ask yourself and your partner, which ones suit your needs best in the long run. Talk to banks and non-banks that can handle the majority of the FHA loans.