How an FHA Refinance Mortgage Can Benefit Today’s Homeowners

When America’s economy is booming, average homeowners will usually not be anxious over paying their mortgage as well as desperately in need for immediate cash.  Obviously, when America’s economy is stalled or dragging, Two men with money isolated at the white backgroundyour typical homeowner becomes nervous about paying their mortgage as well as becoming frantic over acquiring money for emergencies.  Though many will say the economy is better today than it was years ago, others who are treading water to keep their heads above water would disagree.  These are the people who cannot afford to buy a house as well as homeowners who are desperately trying to keep their home.  Past mortgages that were once easy to pay are now becoming harder to make payments on time or are past due.  Homeowners who are praying for a miracle may find that they hold the keys to their salvation and not have to wait for divine intervention to save them.  The keys in question represent their own home as it not only provides a physical security but as financial security as well.  In order to understand how this can be possible, it is important to first understand what an FHA Refinance Mortgage is and then how it can benefit homeowners.

What is an FHA Refinance Mortgage as Well as Their Benefits and Risks

Homeowners in need may jump at the opportunity, no matter what it is, to lower their mortgage payments and to get their hands on immediate funds.  However, there are a few things a homeowner should do before getting involved in an FHA Refinance loan.  After all, no one wants to jump head first into a swimming pool to only find out that there is no water in it!  The same applies here and it is beneficial to be armed with as much knowledge as possible when committing to this type of a mortgage.  First, it is important to know if the value of their home or equity is valuable enough to use to their advantage.  If not, this option can actually makes things worse and prove to be a disadvantage.  Once it is confirmed that the value of the home can be beneficial, and then the process can begin to acquire a new mortgage.  With the new mortgage, the original would be paid off and this second mortgage takes its’ place.  There are a number of ways that this new mortgage can benefit the homeowner.  Monthly payments that were once high now become lower and easier to pay while high interest rates can also be lowered and made to be affordable.  If a homeowner was not satisfied with their original mortgage company can now switch to one that is more desirable.  Home owners who need or want to make large purchases can now have access to money by taking cash out of their home.

Keep in mind that while the advantages sound great, one must contemplate if the risks that are possible are worth it.  Those who lack knowledge of what is involved using an FHA Refinance Mortgage may actually have their interest rates increase rather than lowering them.  Those who have a perfect or great credit history would have less of a risk than those who have a poor credit history or someone that has acquired over time a large amount of debt.  Something else that others may not realize is that penalties may happen to those who are having problems making payments on their home equity credit.  Mortgage companies may have a stipulation in the mortgage agreement that fees will be applied, for example, when payments are not paid on time.  The fee’s can be high and could cost the homeowner thousands of dollars.  These and other risks need to be considered before taking out this type of mortgage.

Options for Using an FHA Refinance Mortgage

Fortunately, there is more than one option available for a homeowner who decides to use an FHA Refinance Mortgage to their advantage.  Which option to take depends on a person’s situation as well as other factors.  These factors will help to see if one is suited for an FHA Streamline Refinance mortgage or an FHA Cash-Out Refinance mortgage.  Being that acquiring one of these options must be done post haste, a homeowner may forget that by doing so can be worse than having the process take time in completing.  In order not to waste valuable time as well as money, it is important to note that this refinance program can only happen when the homeowner is using their present home as their main residence.  Anyone who is interested in the rules that govern a refinance loan needs to turn their attention to HUD 4155.1 Chapter Three Section A.   The rules state 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.”  With that said, let us look more closely at the options that are available to a homeowner.

FHA Streamline Refinance

For decades, the FHA has allowed homeowners to use this option when looking to refinance their home.  When applying for an FHA Streamline Refinance mortgage, the term “streamline” means the amount of underwriting and documentation the mortgage company needs to be performed.  This would beneficial for those looking to refinance quickly and experience less of a hassle.  That way, the homeowner would not feel they have wasted valuable time and money.

To learn more about FHA Streamline Refinance for an FHA Refinance check this site out.

FHA Cash-Out Refinance

The second option that is available to a homeowner is known as an FHA Cash-Out Refinance. When opting to apply for this type of refinancing, the benefit focuses on the home’s present value.  This means that a lender will look at what the value of the homeowner’s house was at time of purchase to its’ present market value.  Whatever the difference of the two is, the remaining amount will be taken out to use for anything except repaying the present lien.  A new mortgage will replace the original and the lender will establish a new refinancing program that the borrower will be responsible for paying out.  For example, a homeowner owes $100,000 on their present mortgage but their home is valued at $220,000; so, their equity is $120,000.  This means that the equity can be converted into cash for the borrower while a new mortgage will be created providing that the loan is for more than the original; which in this case is $100,000.

All one has to do these days is to watch the news or to read about it to realize people all over are struggling to survive.  While homeless people are battling to survive, homeowners are engaged in their own struggles in order to keep their homes.  Some are looking for ways to pay off their monthly mortgages while others are desperate for immediate cash.  Though it may seem hopeless, one option that can be helpful is to refinance your home.  An FHA Refinance loan can be the difference between a final surrender or a surprise victory in reclaiming your home.  Seek out an FHA lender to give you options and show you how an FHA Refinance mortgage can be the difference between being homeless or back to being a homeowner.