How Can I Make an FHA Replacement Loan Work for Me?


FHA Replacement LoanWhen you decide to refinance your mortgage under FHA, you need to look at all the options available. You’ll soon realize that you have more choices available than you think. However, with more options you need to be pickier about your decision. Federal lenders can definitely help you out in this situation to make your life easier. Try your best to hire a quality lender who won’t stiff you in the back for the duration of your refinance.

Keep Your Mortgage Payments Current

One of the first things you should do with an FHA replacement loan is keep everything current. That’s a prerequisite before you even decide to refinance because lenders will look at your record regardless of any refinance decision. If you have a couple of late payments on your record, consider refinancing later after you’ve established a good record of on-time payments up to a year. Late payments certainly give you a bad reputation especially when dealing with new lenders. A clean record ensures a smoother and faster loan process.

Your credit will play a big part in your FHA replacement loan

photodune-10446371-man-thinking-xsfotorIf you don’t have a quality credit score, it’s going to be very hard to convince your lender that you’re able to use it in a cash out strategy. Some bad marks in your credit rapport makes you ineligible for either a cash out refinance or a replacement loan. Also, this is an indicator that you won’t be able to handle a refinance. Before you consider refinancing, make sure other parts of your life are taking care of such as student bills, credit card bills, and general living expenses. If you cannot keep these things at bay, you may want to wait until you dive in the deep end of an FHA replacement loan. You don’t want any burdens to hold you down from prospering in the long run. Also, some of your future financial decisions may depend on a solid credit line. Keep this in mind outside of refinancing.

What to consider with FHA financing?

You have options when you replace your mortgage via federal loans. Whether you decide on a federal cash out refinance or a streamline refinance, it’s purely up to you and your financial needs. Just make intelligent decisions that will advance your mortgage. For example, if you are in need of extra cash every month or lowering your interest rate, why not consider a streamline refinance. This way you can build more stability in your home and decide to pay a higher rate later. Also, if you want to do a federal cash out option, have the funds and the equity/credit line to back it up. Only then will you safely reap the benefits of refinance and take on the responsibilities.

How to Qualify for Federal Streamline Refinance

FHA replacement loanYou may want to go with a refinance option that requires less paperwork. Also, when you see the market rates drop you’ll want to get on the action soon. One of the main things you need in a streamline refinance is a steady source of income rather than a credit/equity line. A few regulations you should know before applying includes:

  • You must be living in the house that you’re refinancing

  • No more than 2, 30-day late payments in the past 12 months

  • You haven’t done a streamline refinance in the last 6 months

How to Qualify for a Federal Cash Out Refinance

Refinancing your mortgage under an FHA cash out option can really diversify your playing field. With a solid credit score of 580, you will need around 3.5 % equity in your home. If you have less than a 580 credit score, you’ll need 10% or higher equity depending on the lender. Also, you should note that there are fees that go into a cash out such as appraisal and repair costs. Why? Lenders must abide by federal government regulation. Paying these fees along with certain rates, provides the lender with a bit more security in case of any major mishaps down the road.

There are plenty of FHA replacement loan options to choose from. Consult lenders if you need some assistance in acquiring a specific refinance option. Make sure that the decision you make is going you be in your favor in the long run.