FHA mortgage loans are ideal for buyers looking for a low down payment, lenient credit requirements, and less strict income requirements. Refinancing your current loan to an FHA loan could lower your monthly payments by lowering your rate, consolidating your debt, or removing mortgage insurance if you have enough equity.
FHA loans are mortgages that are backed by the Federal Housing Administration. Although this backing means that mortgage insurance is required on FHA loans, because lenders are protected they are able to offer lower interest rates and less strict requirements to qualify. Many first-time home buyers find FHA loans attractive for these reasons, although you don’t have to be a first-time home buyer to qualify.
There are several different ways that buyers can take advantage of FHA refinancing. Whether you currently have a different type of loan, or currently have an FHA loan, there may be benefits to this type of refinancing, such as a lower rate, less strict credit requirements, lower monthly payments, or cash out.
If you currently have a type of mortgage other than an FHA mortgage, you may qualify to refinance to an FHA loan and receive a lower interest rate or a more beneficial term length. Buyers whose credit has recently taken a hit often opt for a FHA refinance because of the more lenient credit requirements. If you have a relatively low DTI (debt to income ratio), you could potentially refinance with a FICO score as low as 580.
If this type of refinance sounds like it might benefit you, speak with a loan officer to see what rates and requirements you may qualify for.
If you currently have an FHA mortgage already, you may be able to apply for an FHA Streamline refinance that would lower your monthly payments by offering a lower interest rate or lower mortgage insurance premiums. The typical mortgage insurance premium for an FHA Streamline is 0.55% of the total loan amount annually, and the upfront premium is only 0.01%.
It is important to note that in order to qualify for an FHA Streamline, you must be current on your loan. This means no 30-day late payments in the last six months, and only one in the last year!
If you may benefit from an FHA Streamline refinance, speak with a loan officer to see what rates, terms, and requirements you qualify for.
If you would like to get cash out from the equity of your home to consolidate debt or perform home improvements, you can do so with an FHA loan. If you do a cash-out refinance, FHA loans require you to leave at least 15% equity in your home. You will also be required to have full documentation of your income, employment verification, and asset sharing with this type of refinance.
FHA refinancing is ideal for many home buyers who want to take advantage of low rates and flexible financing options. If you meet the credit, income, and DTI requirements, you may benefit from this refinancing option. Our helpful team of loan officers at Integrity First Lending can help you decide if an FHA refinance is the best fit for you with an in person phone call and consultation.