People have, for centuries, tried to find ways to achieve what they desire. Though mankind has
evolved over time through advances in technology, health, economy and much more, society
continues to have wants and needs that must be fulfilled; therefore, it is important to look at how
these desires can be attained. Money, it seems, can help in acquiring basic needs like food and
shelter. Some can be happy so long as basic needs are met while others who long for the finer
things in life realize more money is needed to satisfy their dreams. Today, it can be harder for
those who have high expectations but not enough money to attain them. However, home owners
have an opportunity to make their dreams come a reality where others cannot. The answer to
their dilemma is to refinance their home. Anyone that is not familiar with this process would
realistically have concerns. In order to quell your fears, let us look at what it means to refinance
with an FHA loan and how it can be profitable to you.
What is Refinancing and Knowing the Benefits and Risks
Before determining whether refinancing your home with an FHA Loan can be beneficial to you,
it is important to understand what is refinancing. When I was first approached regarding this
topic I must admit I was dumbfounded and had no idea how this process works. To begin with, a
homeowner must first see if the equity or value of their home can be used to their advantage.
Once this is confirmed, the homeowner can begin the process of obtaining a new mortgage on
their home. The original mortgage would be paid off and this second loan would be created.
This new mortgage can benefit the home owner in various ways. It can help lower their interest
rates, make monthly payments lower than before, make it possible to change mortgage
companies and even help to make large purchases by taking cash out of their home.
While the benefits can bring a smile to your face, it is important to understand that refinancing is
not for everyone and risks can easily turn that smile upside down. The biggest danger with
refinancing comes to those who are ignorant about how this process works. Those people who
lack the correct knowledge can actually end up increasing their interest rates rather than lowering
them. One example is understanding those with perfect credit history will have less of a risk than someone whose credit history is questionable, bad or has acquired too much debt. Another
is the possible penalties one may be charged with while paying down the mortgage with their
line of home equity credit. Many mortgage companies can have in the agreement a provision
where the homeowner can be charged a fee for doing this, thus acquiring fees that could cost
thousands of dollars. A home owner should be aware of this and know of other risks that can
happen when refinancing your home.
Homeowner Options for Refinancing With an FHA Loan
Once a homeowner has decided on going forward with refinancing using a FHA loan, there is
more than one option available to choose from. Depending on what your situation is will
determine if you qualify for a FHA Streamline Refinance or an FHA Cash-Out refinance loan.
In order to make sure valuable time and money are not wasted, remember that FHA refinancing
can only be achieved by those homeowners who are now using their home as their main
residence. FHA loan rules in regards to refinance loans can be located in HUD 4155.1 Chapter
Three Section A. It states that: “A refinance transaction is used to pay off an existing real estate
debt with the proceeds of a new mortgage for borrower(s) with legal title, and on the same
property.” The section also states that, “The borrower is eligible to refinance the loan, as long as
he/she has legal title, even if he/she was not originally on the loan.”
FHA Streamline Refinance
One option for homeowners is called FHA Streamline Refinance. This refinance FHA loan is
thought of as being streamlined since it provides the opportunity to lower the interest rate on
your present home loan in a speedy manner and can mostly be accomplished without an
appraisal. Another reason for using this type of refinancing is that the volume of paperwork
needed to be finished by the lender is greatly reduced; therefore, valuable money and time are
FHA Cash-Out Refinance
Another option that is available for a homeowner is known as a FHA Cash-Out Refinance.
Choosing this refinancing option has been proven to be extremely beneficial for those who have
seen the value of their property increase in market value in comparison to when his/her home was originally purchased. Selecting a Cash-Out Refinance gives the home owner the opportunity
to refinance their current mortgage by taking out another mortgage that is for more than they owe
In today’s society, many are struggling to find ways to generate funds in order to have food,
clothing, and shelter. Those who are fortunate to have a home still need to find funds to keep
what they have. Refinancing through an FHA loan can be the answer that many homeowners are
looking for. With several choices to choose from, a homeowner will benefit not only in profit
but in piece of mind.