You never want to end up at the bottom of the pole in your refinance option. When it comes to your federally insured loans, know there may be a few extra regulations you should consider before applying. This may help or halt your progress for an ideal federal refinance option. Here are some steps to take to help you acquire a good FHA refinance rate.
1. How to apply for federally insured loans (FHA guidelines)
Federally insured loans have less requirements than conventional loans, but there’s still a process to take for qualification measures. Before considering a good FHA refinance rate, you have to see if the process of going under a federal loan is worth your energy. Some of the basic requirements include: all addresses where you have lived in the past two years, your employer’s name and addresses for the past two years plus your monthly gross salary. Also, you need records of your W-2 forms and submitted income taxes for the past two years. When you go through the application process, you want to be very meticulous as well as have documents on hand to verify your information. You never know if your lender has questions or concerns, so this is a good opportunity to show your proof.
2. Is there a specific refinance plan to benefit your FHA refinance rate?
It all depends on a few details. However, you need to decide if you want to receive a cash sum or simply use equity to build your home? You have a few options on hand to help make a better decision. If you want to use cash towards your car, student debts, invest in a second property (after you’ve lived in your primary residence for the minimum required time), or a vacation, you need a federal cash out refinance. Credit is very important to qualify for this option. Lenders want to be insured as much as possible from this risky situation. A credit score of 580 means you will have to pay 3.5% in equity – a basic federal loan requirement. However, anything less than 580 requires a 10% equity in your home. You want to wait at least a year so you can build up great equity in your home. Also, an appraisal may be required because your lender wants to ensure your home has proper safety and health requirements met. This may also increase the value of your home as a plus side for getting needed repairs or updates. After you receive your cash, you need to rebuild the equity and take on a higher interest rate.
FHA streamline refinance caters more to using credit or equity in your home for your mortgage. Your interest rate drops which reduces the mortgage. Since you cannot acquire cash from your equity, the requirements are toned down and an appraisal is not necessary. Also, federal streamline refinance doesn’t require a huge down payment or credit score such as a Cash-Out refinance. If you have a conventional loan, you can get a replacement loan to move from your existing one to a federal loan. You just need employment verification, credit check, and a good debt-to-income ratio requirement. Weigh your options to see what strategy works best.
3. Why is FHA 203 b Fixed Rate Mortgage Loan Program good for new homeowners?
If you have recently purchased your first home, this is a solid plan to reduce your payments. This plan helps you keep your down payment to a minimum and reduce your closing costs. No income requirement makes this a solid choice. However, you should check with your lender on a solid FHA refinance rate as well as your debt to income ratio. Additionally, you should maximize your credit score before applying.
4. Do your research online before proceeding
You can go to different banking sites and view possible rates online. You can also calculate your mortgage through online calculators to measure different fees. This is a solid preliminary step before talking to lenders. Although you may not get the FHA refinance rate shown on the site, you can meet in the middle with a good lender. Find the best strategy for your financial plan. Outline a few of your expectations and some notes to help you sound more knowledgeable on your choice of action.
There are a few things to consider regarding your rates to help you in long term and short term stability. Before you consult some lenders or banks, use your resources to look at possible rates and calculate them with your monthly fees. This way you’ll be able to acquire a much better situation.