If you have been hesitating about refinancing to get a lower rate or better terms on your home because it sounds like it would cost too much or be too much of a hassle, you might want to check out the streamline refinance with FHA. The FHA streamline refinance program is designed to make it the process of refinancing very quick, easy, and inexpensive for home owners who already have an FHA loan. Borrowers must already have a FHA mortgage loan to qualify for the Streamline. There is no appraisal or income documentation necessary, but the last 12 FHA loan payments must have been on time.
To qualify for FHA refinance loans, you have to have owned the property for at least six months. The process is inexpensive and easy, considering there is no appraisal. However, the no-appraisal refinance only applies if the loan does not increase in amount. There is no income documentation necessary. This is especially wonderful for those who have lost their jobs or are self-employed (with more difficulty proving income). You do have to have a good track record with your existing FHA loan, proven by fact that the last 12 FHA loan payments must have been on time. This is one reason borrowers must already have a FHA mortgage.
Even though borrowers must already have a FHA mortgage, they do not have to go through the same lender for their FHA streamline refinance. However, they do need to use an FHA-approved lending facility. The last 12 FHA loan payments must have been on time, but otherwise there is no income documentation and no appraisal necessary. Closing costs do apply and should be paid prior to the loan or rolled into a “no-cost” FHA loan. A “no cost” FHA streamline requires that there is enough equity in the home, so the overall loan amount does not increase.
FHA streamline refinance programs are the answer to lower monthly payments, lower interest rates, and financial relief for many American home owners. They are simple, with no income documentation and no appraisal required, but borrowers must already have a FHA mortgage and the last 12 FHA loan payments must have been on time. Saving money is the number one reason people refinance. Now, you can save time and money when you use FHA streamline refinancing from FHA-approved lenders and mortgage companies. Most FHA mortgage holders qualify easily. You can find out the current rates online or from your mortgage company.
Officially, you can obtain an FHA mortgage with a FICO credit score as low as 500. Keep in mind, however, that’s the FHA minimum – the individual lenders who actually make the loans often request a score of at least 620-640. If you’re below that, you might consider working with a mortgage broker to find a lender who’s willing to lend to you, or waiting until your credit improves. FHA credit guidelines have been tightening but they are still remaining more flexible than requirements of traditional home loans.
Are you looking to eliminate a mortgage for bad credit with a rising adjustable interest rate? If so, consider FHA because these government loans have helped millions of homeowners save money because today’s FHA rates are low and affordable. Remember, just like with a conventional mortgage, a lower credit score means you’ll have to pay a higher interest rate, so you might want to work on improving your credit for a year or two before seeking a mortgage.
Other FHA credit requirements are fairly borrower-friendly. You must not have had a foreclosure or deed-in-lieu sale within the past three years, a Chapter 7 bankruptcy in the past two years, or a Chapter 13 bankruptcy in the past year. Exceptions may be made for extenuating circumstances. Again, remember that these are FHA minimum standards and individual lenders may not be quite so accommodating.
With less stringent government loan qualifications than most conventional mortgage products, many people are turning to FHA loan programs. FHA home loans are popular for first time home buyers, because they only have to come up with a 3.5% down payment. However, no matter how many homes you have owned, you may be eligible for a mortgage with FHA. How to qualify for a FHA loan is a big question for home owners who have not used these great mortgage products. All borrowers must be able to document their income and employment. Unlike some other home purchase loan options, applicants are usually allowed to use gift money for FHA down payment requirements.
FHA Loans Are an Attractive Option for New Home Buyers
If you want to know how to qualify for a FHA loan, start with collecting the documents you need. Borrowers must be able to document their income to qualify for these government insured home mortgages. You have to have been employed for the last two years, and it is best if it was with the same employer. Your income from the last two years must have remained the same or increased. You do have to come up with a 3.5% down payment, but applicants are usually allowed to use gift money for FHA down payment costs. These minimal requirements mean FHA is popular with people searching for a first time home buyer loan.
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However, though FHA home loans are popular for first time home buyers, they are also popular for those with past bankruptcy or foreclosure. Knowing how to qualify for a FHA loan when you have had one of these can be very empowering. Your bankruptcy had to have occurred at least two years ago; three years for a foreclosure, with perfect credit since the occurrence of either. Since borrowers must be able to document their income for at least the past two years, employment is a must. If someone wants to help you get back on your feet financially, applicants are usually allowed to use gift money for FHA down payment, and you only have to come up with a 3.5% down payment.
Ideally, when you shop FHA home loans online you should be comparing loan companies online to find the best FHA mortgage lenders before you search for your dream home. Approved FHA lenders can pre-approve you for a loan amount so that when you find the right home, you can move on it right away. This is also where it comes in handy to look for FHA lenders that have experience with government loans and make sure the lender you are talking to is approved for FHA lending in your state, as they will step you through the process quickly and easily. The pre-approval process will set FHA loan limits for your specific finances, letting you know your price range up front.
So, when you want the best FHA lending companies, start by comparing lenders online, focusing on approved FHA lenders. Make sure the lender you are talking to is approved for FHA lending in your state. Look for FHA lenders that have experience with government loans, and get pre-approved within the FHA loan limits so you can find and purchase the right home for you and your family. Getting pre-approved mortgage means that you will receive a letter from the designated underwriter notifying you that you are pre-qualified for FHA financing pending the specified conditions enclosed in the pre-approval. (ie. Appraisal, income documentation, verification of employment, etc.)
As the housing market and mortgage industry continue to struggle, government mortgage programs have become more important than ever. When you are considering refinancing with FHA, make sure you are comparing loan offers from mortgage companies that have experience funding FHA loan programs.
The FHA Loan Qualification Criteria is Very Reasonable
The basic of how to qualify for a FHA loan are very simple. Borrowers must be able to document their income, including employment for the past two years with a stable or rising annual income. They have to come up with a 3.5% down payment, but applicants are usually allowed to use gift money for FHA down-payment. For those who have gone through bankruptcy or foreclosure, credit must be perfect since the event. Because of limited down payment and qualification requirements, FHA home loans are popular for first time home buyers.
FHA mortgage loans are very popular with first time home buyers, but FHA loans are not just available to rookies in real estate. FHA stands for Federal Housing Administration, a United States government agency that insures certain mortgage loans. There are several popular types of FHA loan programs for refinancing and first time home buyers, including the following five popular FHA mortgage loans.
1. Home Loan with a 3.5% Down-payment
The FHA home loan with a 3.5 % down-payment is a mortgage product available to borrowers. The qualifications for an FHA home loan with a 3.5% down-payment are less stringent than those of conventional mortgage products. The 3.5% down-payment is the lowest possible down-payment for an FHA mortgage. Borrowers will have to pay mortgage premium insurance for FHA home loan with a 3.5% down-payment.
2. FHA Streamline Refinancing
The FHA streamline refinance is a refinance product for those who want to lower their interest rate or change the loan term. The FHA streamline is available for people who have a current FHA mortgage. FHA streamlines make refinancing simple for those who have paid their FHA mortgage on time for the past twelve months. This rate and term FHA refinance often has fewer fees and less red tape than other refinance options, such as no appraisal and no income documentation.
3. Rate and Term FHA Mortgage Refinance
The rate and term FHA refinance product is available for people with or without a current FHA mortgage who need to change the interest rate or term of their loan in order to lower monthly payments.
4. Refinance Loans with Cash
If a rate and term FHA refinance is not for you, FHA cash out refinance may be precisely what you need. The FHA cash out refinance is designed for people who are refinancing to accomplish other goals instead of or in addition to changing the rates and terms of the contract. FHA cash out refinance products can be used to increase the value of the home through improvements or consolidate debts (often high interest, revolving debt) into a lower, fixed rate equity loan. If you own your home outright, a (HECM) Home Equity conversion mortgage may be the answer.
5. (HECM) Home Equity Conversion Mortgage
The FHA (HECM) Home Equity Conversion Mortgage is a reverse mortgage product available to home owners over the age of 62 who own their homes outright or have a low outstanding balance on the home. The money from (HECM) Home Equity conversion mortgage can be dispersed as a lump sum, in monthly payments, or as a home equity line of credit.
As each day goes by many homeowners are becoming more concerned because refinance rates are so low, but strict loan guidelines have prevented them from qualifying for a mortgage with a record low rate. Bank and lenders are requiring more income documentation and high credit scores in most cases. Even FHA refinancing is now subject to a minimum credit scores for the first time since FHA was created in 1934.
With growing concerns for inflation it is only a matter of time for conventional and FHA rates to begin to rise. Banks can’t continue to offer 30-year fixed mortgage rates at 4.5%. The Federal Reserve announced last week that they would keep key interest rates at zero percent, but indicated that rate hikes were likely in the near future. Many homeowners have admitted being frustrated because with a lack of home equity and lower credit scores they are often rejected from mortgage refinancing.
- Compare conventional and FHA loan programs now before conforming limits rise at the end of summer
- Some FHA lenders are more aggressive with approving a bad credit refinance for a borrower with compensating factors.
- FHA refinance loans can be approved for borrowers with credit scores as low as 500.
- Government loan programs offer multiple mortgage terms such as 3/1, 5/1, 15-year, 30-year.
- Mortgage insurance is required on FHA loans unless it is a 15-year mortgage deemed less than 90% loan to Value.
Will Congress mandate an increased down-payment requirement for FHA home loans in 2012? FHA rates remain at record lows, but default rates are high and the mortgage insurance premium has been raised so many times that it really brings into question the future of FHA mortgages especially for new home buyers. The U.S. House Financial Services Committee has drafted legislation that would, among other things, increase the FHA down-payment requirement to 5% and prohibit borrowers from financing their closing costs. The 2011 FHA requirements for home financing continued the tradition of a 3.5% down-payment. FHA guidelines were tightened dramatically over the last few years and for the first time the government finance program implemented a minimum credit score.
Berman went on to share the MBA’s opinion on the matter, saying, “The current minimum down-payment of 3.5% for borrowers with fico scores of 580 or above and 10% for borrowers with credit scores of 579 and below permits borrowers to have appropriate “skin in the game” while providing credit-worthy homebuyers with an option for entering the home buying market. Maintaining the existing minimum down-payment requirements, while requiring strong underwriting standards, such as full documentation and income verification, allows borrowers to responsibly become, and stay, homeowners.”
What Impact Will Higher FHA Down-Payment Requirements Have on the Sluggish Housing Industry?
The Mortgage Bankers Association is not the only industry group to oppose the down-payment hike. Ron Phillips, President of the National Association of Realtors, shared similar sentiments in his prepared remarks. “NAR strongly opposes raising down-payment requirements for FHA loans.” The correlation between down-payment and loan performance is significantly less important than the linkage to strong underwriting, which FHA continues to have. FHA’s foreclosure rate remains less than conventional mortgages, so we don’t believe changes to the down-payment would do anything but disenfranchise many creditworthy homebuyers”.
Buying a home today can be complicated, but financing a home with FHA makes it so much easier. FHA financing is offered by the U.S. Department of Housing and Urban Development (HUD). This lending program is a lot more flexible and accepting of borrowers than most private lending options, which is what makes it such a popular choice for many people. Bad credit, money down, and other issues that would typically turn off potential lenders aren’t issues with an FHA home loan. In today’s housing market, FHA mortgage rates are the lowest and the government home finance incentives are better than the conventional mortgages. First time home buyer loans are the most common product offered by this organization, and they offer low down-payments and FHA is flexible with credit, making it easier for people to get a new home.
FHA offers affordable home financing for just about everyone. No matter what you need, you can guarantee that you will find something that suits your needs with an FHA program. FHA allows new home financing to 96.5% loan to value and home buyers only need a 3.5% down-payment. That means that if you buy a $100,000 home, you only need $3500 down. That’s unheard of, and it makes it easier for more people to become homeowners, no matter what they are dealing with or what hurdles they have to overcome.
The current FHA interest rates are lower than many other loan programs, too. That allows people to get lower payments and better rates than they might have thought possible. Whether you are a first time buyer with good or bad credit, you can finance a new home with an FHA home loan with ease. Simply talk to a lender about FHA programs that suit your needs and whether or not you qualify. There are guidelines to be met, but they are generally small and don’t disqualify too many people. Just take your time and learn as much as you can so that you are truly prepared for your new home purchase.
Just because you can get an FHA loan doesn’t mean that you should automatically go buy a house if you really don’t want it or can’t afford it. Make sure that you are able to afford their low down-payments and loan payments and that you really want to be a homeowner. This is a big investment and while the flexibility of FHA loans is nice, it doesn’t mean that you have to buy. If you have been looking for a new home and a new lending solution, however, this might be exactly what you have been searching for.
For the last few months, we have heard whispers in regards to HUD minimizing the 2012 FHA loan limits. The reality is that lower loan limits will have an adverse effect homeowners, new prospective home buyers and mortgage professionals, especially in high cost regions like California, Colorado, New York, New Jersey and Washington D.C. In a recent article, Lew Sichelman discusses the pending changes for conforming and FHA loan limit in 2012.
What is the Maximum Loan Amount with FHA in Your Neighborhood?
Unquestionably the revisions on home loan limits will have a significant impact on the FHA home loan programs. These are mortgages insured by the Federal Housing Administration, because they have been more aggressive on credit and home equity guidelines compared loan programs securitized by Fannie Mae or Freddie Mac. Sichelman revealed in a recent analysis that FHA loan limits will likely be reduced in 669 of the 3,334 counties or county equivalents when the ceilings revert back to the levels determined under the Housing and Economic Recovery Act of 2008.
To Get More Info on FHA Limits and Loan Amount Eligibility (no cost or obligation)
Congress has extended FHA loan limits in 2009, 2010 and 2011 on an annual basis, but in the upcoming year it appears that Fannie Mae, Freddie Mac and FHA will reduce maximum loan limits rather than extend them. Unfortunately this will reduce the pool of homeowners looking to refinance with FHA. Many FHA lenders are concerned that the reduced 2012 FHA loan limits will have a negative impact on their business. Many economists also point that if HUD reduces loan limits on FHA home loans it could actually trigger an increase in foreclosures, because more homeowners will be unable to find affordable home loans.
How Will Lower FHA Loan Limits in 2012 Effect Loan Origination?
The lower FHA limits will take place on October 1 unless Congress intervenes. That’s almost three times as many markets that will be affected when it comes to loans that conform to the limits placed on Fannie/Freddie mortgages. According to an earlier analysis by the Federal Housing Finance Agency, only 250 county or county-equivalent areas — a “small fraction” of the total, the FHFA said — will be affected by the pending change. The government home finance analysis indicates that its FHA loan limit would fall by more than 5% in eight states — Arizona, California, Colorado, Connecticut, Massachusetts, Maine, New Hampshire and Oregon — as well as the District of Columbia. When evaluated for the potential impact on the number of loans eligible for government insurance, Colorado, Maine and Oregon fall off the list and Nevada and Puerto Rico come on.
The FHA analysis reported a total of 44 Puerto Rican municipalities would feel the greatest pinch, with a projected decline in 2012 FHA loan amounts of a whopping $221,000. But that would only impact 4% of those areas’ loan count. Other places would take big hits, too. The limit is projected to fall by $75,200 in Maricopa County, Ariz., from $346,250 to $271,050. In Los Angeles County, the lid would drop $104,250, from $729,750 to $625,500. But in Mendocino and San Joaquin Counties in California, it would sink by $138,750 and $184,000, respectively. The change could be equally as tough on the East Coast, too. In Monroe County, Fla., for example, the FHA maximum is projected to plunge by $200,500, from $729,750 to $529,000.
Until three years ago, FHA mortgage limits were set at 95% of the median price house price for each particular area. But the maximum could not exceed 87% of the ceiling placed on the GSEs or go lower than 48% of that ceiling. In February 2008, however, Congress changed the formula in an effort to mitigate the economic downturn by temporarily setting the limit at 125% of the area median but not to exceed 175% of the GSE limit of $417,000. Five months later, though, lawmakers changed the rules again when they passed the recovery act, this time by assigning the task of setting the conforming loan limit to the newly created FHFA.
As the housing sector and American economy continue to struggle, FHA mortgage rates have declined to the lowest point of the year. As usual, bad news in the economy has help create good news with the current FHA rates dropping. This should help loan companies that provide government financing like FHA mortgage programs that slowed down drastically after HUD raised FHA insurance premiums last month for the 2nd time in the last 6 months. The noteworthy drop in FHA interest rates could help off-set the insurance rate hikes.
The US Government has the Ability to Stem the Foreclosure Crisis with Aggressive FHA Home Loans
Even with inflation concerns coming into focus, the Federal Reserve has kept the key interest rates at nearly zero percent. Fed Chief Bernanke has kept his promise of doing everything he can to help the housing industry rebound because Americans have access to the longest streak of affordable home financing that we have seen in a century. Still with home values falling for 37 consecutive months you have to wonder what it will take to get the housing sector back on track. Former Ditech mortgage executive, Jeff Morris said, “Lenders could drop rates to 2% and home values would still be hindered because it’s the tight mortgage guidelines and unreasonable requirements for lending that are preventing millions of Americans from refinancing mortgages and preventing millions of consumers to become first time home buyers.” Morris continued, “The FHA mortgage rate is amazingly low and affordable but it is not accessible for a high percentage of Americans who simply don’t qualify with today’s tighter conventional and FHA guidelines.”
Get Approved for the Lowest FHA Rates in 2011
Many loan professionals believe the 2011 FHA requirements have gone too far too quickly. Too many homeowners have been hung out to dry with adjustable rate mortgages that they cannot afford but refinancing with FHA or a traditional lender simply is not an option because they do not meet loan eligibility. Homeowners should have been given a grace period to refinance before banks and lenders tightened refinance and purchase money guidelines. The pool of qualified borrowers for mortgage refinance and home purchase loans has shrunk to the lowest level in decades. Food and energy costs have skyrocketed yet most Americans are making less. With a 9% unemployment rate, we anticipate FHA rates will remain low for the rest of 2011 and into 2012.
5 Recommended Changes that FHA Should Incorporate to Help the Housing Sector Rebound
- Eliminate the FHA Minimum Credit Scores for Home Loans – One of the keys to FHA’s success has been their flexible criteria with credit. Qualified borrowers have been benefitting from bad credit refinancing with FHA for decades and the default rate has always been minimal because FHA underwriting has been good at approving loans that make sense.
- Revert back to 2009 Rate for FHA Premiums – This will lower the housing expenses by hundreds of dollars a month for many homeowners in the high cost regions like California, Colorado, Connecticut, Florida, Washington DC, Virginia, New Jersey and New York.
- Allow Mortgage Refinancing to 125% for rate and term transactions for homeowners that have not been late on the mortgage in the last 24 months and who have had their home loan prior to 2008.
- Enable homeowners to consolidate 1st and 2nd mortgages together up to 100%. Many homeowners have credit lines and 2nd mortgages with high interest rates and they do not have enough equity to refinance.
- Keep the FHA loan limits at 2008 levels. This will help homeowners leverage the low fixed 30-year mortgage rates and provide peace of mind and protection against inflation and rising interest rates.
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