Being locked into a mortgage sounds like a great thing. You have a home, you have somewhere to build a life, you have a place to raise a family, but the mortgage itself can seem a bit painful at times. While it’s a necessary payment, many homeowners find after a few years that they want to try to reduce the interest or mortgage payments, hoping to make the burden easier to shoulder. So they turn to refinancing. For some, this isn’t a problem, but for others it can be difficult to secure a refinance due to poor finances. However, through the FHA there are a variety of home refinance programs, which means that most homeowners, regardless of their financial state, will typically find that there is something out there they can qualify for.
Home Refinance Programs for Stable Mortgages
While there are a variety of FHA refinance options, there are some that are geared toward homeowners who are struggling with their finances, and there are others that are designed to be taken advantage of by homeowners who aren’t having trouble with the mortgage but simply want to adjust the terms. These homeowners typically find that the cash out options, the streamline, or the no cost option are the best for them,.
The cash out refinance enables the homeowner to pull out the equity in the home and use it for other investments or purchases. It’s recommended that you use the money for investments, but it isn’t tracked or controlled so really it’s up to you. With a cash out refinance you increase the mortgage amount to cover the cost of the money you’re pulling out. At the same time, ideally you will reduce the interest rate to something a bit lower than what you have now. The mortgae payment will more than likely rise to cover the equity, but the money will be cash in hand.
The cash in option and the streamline are a bit different. both of these refinances focus more on adjusting the terms of the loan rather than pulling out the equity. This just means that the equity stays in the mortgage. The benefit of these options is the adjusted terms, which often include lower interest rates and mortgage payments. There is a difference in these loans and that is that the streamline option has fewer requirements than the cash in option. In addition to this, the streamline is only available for homeowners who have existing FHA mortgages.
Short Refinance, HARP, and Help for Underwater Mortgages
Because of the potential benefits of a refinance, there are home refinance programs in place for homeowners who are struggling to make it all work. With these options the terms can be adjusted even if the homeowner is unable to qualify for a traditional refinance. a few of the programs for struggling homeowners include the short refinance, HARP, the streamline options, and HAMP, although this one is actually the Home Affordable Modification Program.
All of these home refinance programs are great for people who are underwater on their mortgages, meaning they owe more than the home is worth, but they each operate a little differently than the others. First, the short refi is a cross between a short sale and a refinance. With this program the lender forgives part of the debt, reducing the loan amount to not less than 97.5% of the home value. HARP (Home Affordable Refinance Program) is similar to the short option but it is not a forgiveness of debt. Instead, the interest rate is reduced and the loan term is altered, usually resulting in a lower mortgage payment. The streamline option is great for struggling homeowners because it doesn’t require proof of income, a home appraisal, or even a credit score. You can simply refinance with your current lender into a lower interest rate.
While all of these options are great, they do have one thing in common and that is that you need to have a good payment history on your mortgage. If you are in default, these programs may not be accessible to you. That is where HAMP comes in. This is a modification program designed to help you keep your home even if you have gotten into default. While it isn’t a refinance, it is an option worth looking into.
As a homeowner you have many options available for you to refinance. If you’re considering the benefits of a refinance and want to adjust your loan, speak with a qualified loan officer and your lender to determine what steps you will need to take to be approved for the loan you want.