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FHA Home Loan Refinancing Options

04/28/2010

FHA refinancing makes sense for a lot of people, including those with tarnished credit. One of many advantages is that borrowers can apply three years after foreclosure and two years after bankruptcy.

Depending on the home refinance option chosen, tapping into the home's equity can help cover the costs of a home improvement project; something that could increase the value of the home. When cash isn't needed, FHA refinancing can also lower monthly payments. FHA refinancing can even be used to consolidate your first mortgage and second mortgage into a single loan or to switch from an adjustable mortgage into a fixed rate.

When pursuing FHA refinancing you have several options including several that are no cost. However, these options are only available when refinancing a current mortgage rate on a principal residence.
Here's an overview of two popular options:

Streamlined Refinancing

This type of FHA refinancing is quick and easy just like the name suggests, but is only available if the original loan is an FHA loan. The goal with this option is get the lowest mortgage rates. Because the original home loan is an FHA loan, the process requires less paperwork to complete. Plus it can usually be completed without a new appraisal. Both benefit the borrower by lowering costs while saving time and effort.

An original home loan in good standing is needed to qualify for a Streamlined Refinance. Another condition is that after refinancing, your monthly interest payment must be lower. This option doesn't allow you to receive any money. But it does result in paying less each month which frees up extra cash that you can use any way you choose. This is a great option for your FHA home loan if you're financially sound and have little debt.

Cash Out FHA Refinancing

If the market value of your home has increased since it was originally purchased, consider this option to obtain a new mortgage for more than the amount still owed on the original mortgage. The property's equity helps this happen. With the new mortgage you pay off the original mortgage and pocket the rest. The amount of cash you'll be able to take out cannot exceed 85% of the home's appraised value which is higher than a conventional loan's limit of 80%.
Refinancing to take advantage of lower mortgage rates is a smart financial moving that can save thousands of dollars over the term of the loan. So why wait? Apply for an FHA refinance loan today.

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