You already own a home, so you're at least somewhat familiar with the mortgage process. If you've never refinanced through FHA you might think that it's more complicated because you're involved with a government agency. Well, you'll be pleasantly surprised to learn that refinancing with an FHA loan is really no different than than the process of refinancing with any other loan. Of course, you have many more protections and it will be easier to get qualified with FHA.
If you already have an FHA loan, you have a few more options for refinancing than if you than if you have a subprime, conventional or other non-FHA loan. Ask your lender.
Are you looking to take advantage of lower interest rates? Are you looking to consolidate some credit card debt or a home equity loan into one single mortgage? Are you looking to take cash out of your property? Your refinancing goals will determine what kind of refinance loan you want to apply for.
How much you can afford depends on your income, your current monthly expenses and the interest rate. There are some online tools you can use, but it is best to visit an FHA-approved lender get a more accurate picture. Most lenders will give you a pre-qualification letter which states how much loan they could give you.
You should remember that prequalification is just to give you a preliminary idea of what you can afford and to identify any major problems. It's not a guarantee that you will be approved for your loan.
Save money by doing your homework. Talk to several lenders, compare interest rates, and negotiate or bargain to get a better deal. Consider getting pre-approved for a loan.
Why ask for an FHA mortgage loan? There are many reasons to ask your lender for an FHA loan instead of a conventional loan or an expensive and very risky sub-prime loan.
Lower cost - FHA loans have competitive interest rates because the Federal Government insures the loans. Always compare an FHA loan with other loan types.
Smaller down payment - The FHA offers a low 3% down payment, and that money can come from a family member, employer or charitable organization. Many other loans don't allow this. Many other loans require 20% down, too.
Easier to qualify - Because the FHA insures your mortgage, lenders are more willing to give loans with lower qualifying requirements, so it's easier for you to qualify.
Less than perfect credit - Even if you have had credit problems, such as bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan because FHA insures your mortgage.
More protection to keep your home - The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, the FHA has many options to help keep you in your home and avoid foreclosure.
The process is pretty much the same as your original mortgage. After selecting a lender, you�ll meet with a loan officer at a convenient place like your current residence or your real estate agent's office. The loan officer will help you complete a refinance application and ask you to sign a several forms authorizing the lender to verify (check on) your employment, income and savings.
The lender may order an appraisal to estimate the value of the property and its condition. The lender will review the appraisal, to determine if the value of the property supports the refinance amount. The lender then makes a decision on your application.
You're finally ready to go to "settlement" or "closing." Be sure to understand the amount of cash you will need to bring to settlement. It's a good idea to have a bit extra set aside just in case. Be sure to read everything before you sign. You'll have lots of documents to sign.
Get a clear understanding of each dollar item and what you are paying for. The lender or title company is making a profit to conduct this closing and you should expect them to explain anything that isn't clear to you.
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