November 14, 2018

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Four Things To Check Before Refinancing Your Home Loan

Four Things To Check Before Refinancing Your Home Loan

What do you need to check before applying for an FHA refinance loan? There are some important areas to consider in the planning stages of your new loan that include interest rates, property values, and more.

FHA Refinance Loans And Interest Rates

Are you in a non-FHA loan hoping to get a lower interest rate through refinancing? Do an online search and you’ll find that lending websites indicate FHA home loans feature lower rates than conventional mortgages.

The rates actually offered to you are contingent on your financial qualifications and how rates are performing at the time. It is very important to shop around for the best rates available to you. In certain times when rates are much lower, it may be tempting to wait or “float” to see if rates move down even further; in some cases this may not be advisable based on the potential for rates to shift higher.

Much of this is situational and it may be a good idea to have a conversation with your chosen lender about when to “lock” an interest rate and when to float when buying; the timing of your refinance loan may need similar considerations.

Refinancing isn’t the same as buying in several ways, but the interest rate issue can bring similar concerns. Will your lender allow you to lock in a rate for a refi loan and “float down” on a limited basis should the rates improve? Discuss this possibility with your lender.

Check Your Payment History Carefully Before Applying For Your Refinance Loan

Go over your payment history carefully before applying for any “credit check required” refi loan. FHA loan rules and lender requirements may not be identical but in general it is strongly recommended to come to the loan application process with no late or missed payments for the 12 months prior to the application.

All areas of your payment history are important but your housing payments are especially critical and not just for the obvious reasons. For refinancing, it’s not just the on-time payments your lender will be concerned with; your total number of mortgage payments are also important.

For example, the FHA loan rules for Streamline Refinancing indicate the following:

On the date of the FHA case number assignment:

  • The Borrower must have made at least six payments on the FHA- insured Mortgage that is being refinanced;
  • At least six full months must have passed since the first payment due date of the Mortgage that is being refinanced;
  • At least 210 Days must have passed from the Closing Date of the Mortgage that is being refinanced; and
  • If the Borrower assumed the Mortgage that is being refinanced, they must have made six payments since the time of assumption.

Check The Local Real Estate Market

Are you applying for an appraisal-required FHA refi loan such as a cash-out refinance? If so, it may be a very good idea to get a read on what the local housing market is doing. Are property values and house prices on the rise near you? This could be an important factor in how much cash-out refinance loan you are able to get.

Are property values and prices in your area going lower? Talk to your lender about the implications of that where it applies to how much cash out you could get on the transaction.

Examine Your Financial Goals Now

Are your financial plans the same as when you originally purchased your home? Deciding to stay long-term or sell sooner rather than later, for example, could affect how you look at loan options such as FHA Adjustable Rate Mortgages (ARMs), choosing a 15-year or a 30-year refi loan, etc.

An FHA ARM loan makes sense for a borrower refinancing to get a lower rate who is not planning to keep the home for the full term of the mortgage. An FHA Streamline Refinance makes sense for borrowers who need a lower rate and plan to stay in the home longer. Cash-out refinance loans are good for those who want liquid capital to use as they need without restrictions, and an FHA 203(k) rehab loan is a choice those who have needs specifically for money to repair or renovate the home.

These options have good applications when used properly, but figuring out which one is best for you requires getting answers in the areas listed here for the most well-informed lending choices.

Joe Wallace - Staff Writer

By Joe Wallace

October 24, 2018

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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