For anyone needing to refinance FHA loans, a combination of understanding these government-backed mortgage products, and taking advantage of current market realities will help the borrower to achieve success. FHA loans are a specific format for government-insured mortgages that help more people to have access to home ownership. One of the essential elements of the FHA loan is a lower down payment for the original mortgage, which influences rules and regulations on refinancing these mortgage agreements.
One thing that borrowers need to do in refinancing FHA loans is to comply with time restrictions and other rules for refinancing. Modern restrictions on FHA refinancing include the requirement that a borrower must hold the property and the original mortgage for a specific period of time before refinancing. Lenders may try to ask new home buyers to refinance within several months of purchase, but this may not be legal with an FHA loan.
In order to make sure that refinancing makes sense, someone holding an FHA mortgage should look carefully at recent interest rate changes and what is currently being offered when refinancing FHA loans. Most experts contend that refinancing any mortgage will not be a good deal unless the difference in interest rate is substantial. In talking about mortgage interest rates, professionals use a “point” system that just refers to fractions of a percentage. For example, if the original mortgage interest rate was 5.25, and the current rate is 5.05, the refinancing will only bring down the interest rate by two tenths of a percent, which may be considered only a marginal savings. An ideal interest rate reduction for refinancing would include an interest rate difference of 1% or more.
When assessing how a refinancing deal will affect the borrower’s pocketbook overall, that person must look at all of the costs and fees associated with the refinancing agreement. Lenders who want to get involved in refinancing FHA loans will often point to the total interest rate reduction as the complete savings generated by the refinancing deal. It’s important for the borrower to evaluate the one time lump sum costs of refinancing, against the long-term savings to see how much they will really benefit when the deal is inked.
Another important tip for those who want to be successful in refinancing FHA loans is to use all available government programs. Government initiatives like the Home Affordable Modification Program (HAMP) and the greater Make Home Affordable plan are largely meant to help those who need to refinance to avoid foreclosure, but they can also benefit other homeowners as well. Look up the current programs and offers available from the federal government to help in refinancing the FHA mortgages that the federal government stands behind. The FHA loan represents a partnership between the government and the individual household, and accessing federal initiatives can make a big difference in all aspects of handling or administrating one of these mortgages.