FHA Secure Refinancing
The Federal Housing Administration (FHA) was established in 1934 to offer mortgage insurance on loans through FHA-approved lenders. The FHA insures mortgages on single and multi-family homes, and other approved purchases such as manufactured homes. The FHA does not issue the loans themselves, but FHA mortgage insurance is quite attractive for a prospective lender because FHA mortgage insurance protects the lender's investment. Should a homeowner default on the mortgage or go into foreclosure, the FHA pays the lender.
Loans insured by the FHA feature low down payments, and costs for FHA mortgage insurance are built into the mortgage payment. Those costs disappear five years into the loan or when the loan reaches 78% of the property value (whichever is longer).
Many homeowners with adjustable rate mortgages find themselves in financial trouble because of current interest rate increases. Foreclosure is a bigger threat than ever, but fortunately the FHA has stepped in to help with FHASecure Refinancing. Starting July 14, an expanded FHASecure refinancing plan allows homeowners who have missed up to three mortgage payments in the last 12 months under certain circumstances to avoid foreclosure with FHASecure.
You don't need an existing FHA home loan to qualify for an FHASecure refinance loan - the program is designed to specifically to help those without FHA loans to get lower payments, prevent default and foreclosure, and protect their investment.
- Homeowners with current or delinquent non-FHA adjustable rate mortgages are eligible.
- You are not automatically disqualified based on delinquency on your current loan.
- You must have a dependable income and be able to make your mortgage payment.
- If you are in default, you must show delinquency or default is the result of increased interest rates and the resulting higher mortgage payments.
- If you are current on your mortgage payments, any type of conventional loan is eligible for FHASecure refinancing.
In addition to these specifications;
- "Those who are current on mortgage payments can refinance non-FHA fixed rate or adjustable rate mortgages. Those who are behind on their mortgage payments may only refinance adjustable rate mortgages.
- "Borrowers may be required to verify their mortgage payment history through the mortgage servicer or with cancelled mortgage payment checks.
- "Cash out refinancing" is not eligible under FHASecure.
FHASecure refinancing is available for single-family or multi-family homes and manufactured homes. A new FHA premium pricing plan goes into effect on the same date the expanded FHASecure refinancing program begins, July 14 2008. Borrowers should know this "second chance" refinancing does not indicate relaxed requirements for credit. Borrowers applying for FHASecure are subject to the same requirements as any other applicant for an FHA loan. Delinquency issues for mortgage payments aside, loan officers still require proof you are a good credit risk. Borrowers should;
- Have steady income from a dependable source.
- Show a reliable payment history on other debts.
- Have a debt-to-income ratio below 41%.
- Have a credit score appropriate for any home loan.
