At the time of this writing, mortgage loan interest rates have fallen to historic lows; VA and FHA mortgage loan interest rates are at a best-execution 3.75% (offered to the most financially qualified applicants) and many homeowners may be saving thousands over the lifetime of their mortgages by refinancing into a lower interest rate.
But what do you need to know about refinancing? There are several aspects to consider before you commit to a specific home loan refinance option.
FHA loans offer a variety refinance loan options including the typical simple refinance (offering no cash back at closing time), cash-out refinancing, and for those who have existing FHA mortgages, the FHA-to-FHA Streamline refinance option offers a lot to a borrower with a low interest rate and a requirement that (for most transactions) the loan provides a benefit to the borrower.
That benefit may be a lower mortgage rate, but it can also be getting out of an adjustable rate mortgage and into a fixed rate loan. The predictability of a fixed-rate mortgage is a definite advantage.
For all these types of loans, one of the biggest things you need to know going into the application process is that the refinance loan will still require occupancy; FHA refinance loans are for owner/occupiers and not for investment properties.
FHA refinance loans should be prepared for as early as your first mortgage loan; the lender will in most cases (except for FHA Streamline Refinances which have no FHA-required credit check) need to review your credit habits since your original mortgage started.
Don’t apply for more credit ahead of your refinance loan, make sure you have been making on-time payments for a full year before you apply–no late or missed payments in the last year leading up to the loan.
If you treat your refinance loan the same as your purchase loan when you bought the house originally, your chances at refinance loan approval are much greater.
And don’t forget that you can shop around for a refinance loan and definitely SHOULD shop around–you may find a lender willing to go even lower on interest rates, or you may find a financial institution that offers you an incentive for switching lenders. Compare lenders, shop around, and make the most informed loan choice you can.
One way you can do that is by comparing lenders in your local area first, and be sure to take the lowest numbers you’ve gotten so far and inform the next lender you speak to what you’ve already discovered.
Ask the lender if they can do any better-it’s a great strategy.
If you aren’t sure where to start with an FHA refinance loan, you can always discuss your circumstances with a HUD-approved housing counselor. Be sure to call the FHA at their toll-free number 1-800 CALL FHA and ask for a referral to a HUD approved housing counselor in your area.