Whether you want to refinance your mortgage to increase the equity in your home, or simply need a lower interest rate, there are many options to choose from with an FHA refinance. This type of loan is designed to give you the flexibility to pay off your loan in a shorter time frame. In addition, an FHA refinance allows you to refinance even if your current mortgage is not an FHA loan. The loan can be obtained with as little as 3.5% equity, and you can qualify for the program even if you have a high debt to income ratio. However, it will require you to pay PMI on your mortgage, and there is no cash back offered.
FHA Refinance Rates
The average FHA refinance rate fluctuates every week and depends on many factors, including the stock market and Federal Reserve policies. The rate is also different for different loan terms, with 30-year mortgages typically having a higher rate than shorter loans. However, the average FHA refinance rate is close to the average for conventional loans.
The best FHA refinance rate is dependent on several factors, including your credit profile and loan details. Fortunately, the paperwork for these loans is straightforward, and the application process is simple. Most FHA loans do not require income verification or appraisals.
Streamline Refinance
FHA streamline refinances have a few key advantages over conventional refinancing. First, they require less documentation. In addition, they do not require a new appraisal. They also give homeowners the flexibility to change loan terms to lower their monthly payments and interest rates. They can change from an adjustable-rate mortgage to a fixed-rate mortgage, or extend the length of the loan.
If you meet the eligibility requirements, you can apply for a Streamline FHA refinance. To qualify for the program, you must have a mortgage that was insured by the FHA. You must also be current on your payments. Furthermore, you must have made at least six payments on your existing mortgage. You can also apply for a Streamline FHA refinance as many times as you want.
Cash-out Refinance
Taking out a cash-out refinance for an FHA home loan can help you finance home renovation projects. The qualification requirements are much easier than for other home loans. You can qualify for an FHA cash-out refinance if you’ve been living in your home for at least a year and have made your monthly payments on time for at least 12 months.
When considering a cash-out refinance, be sure to compare the requirements of different lenders. Some lenders may require a credit check or appraisal. While this can lower the costs of closing, you will also find that it takes a longer time to get approved for the cash-out refinance. This type of refinance is also less likely to have low interest rates, so you should be prepared to pay higher closing costs and have patience. However, you may be able to get a larger loan amount if you have a good credit score. However, you should remember that increased debt may increase your risk of falling behind on payments.
Loan to Value
Before applying for an FHA refinance loan, it is important to understand what the loan-to-value ratio is. This ratio is the amount you must borrow against the value of your home in order to qualify for the loan. It can be up to 96.5%, or 80%, depending on the lender’s guidelines. To calculate the maximum loan-to-value ratio, you must subtract the mortgage loan balance from the appraised value of your home. You can also use a website like Rocket HomesSM to estimate your home’s value. Then, subtract the estimated closing costs and mortgage insurance from the total home value.
There are two main types of refinance loans offered by the FHA. One is a traditional refinance, and the other is a cash-out refinance. The cash-out refinance allows you to keep the excess funds from the sale of your home, while the traditional refinance allows you to get cash-in-hand.
Closing Costs
FHA mortgage closing costs are typically between two and five percent of the total loan amount. The amount will be higher or lower, depending on the type of home and lender. In addition, the amount of property taxes and homeowner’s insurance required to close a loan can vary. In some states, closing costs are even more expensive – up to six percent of the total purchase price.
FHA guidelines allow a borrower to finance closing costs as long as they have a 3.5% down payment. The down payment can be paid from a gift or by a family member. However, these costs aren’t a deal breaker. If you’re worried about closing costs, you can ask the seller to cover them if they agree to cover them.