Loan Modification

FHA Refinance May Assist Homeowners with Little Home Equity

By Karen Lawson

Mortgage rates are creating plenty of excitement, but low rates aren’t helping homeowners who cannot refinance due to lost home equity. Refinancing from a conventional mortgage loan to an FHA loan may provide a solution. FHA allows refinancing of up to 97.5% loan-to-value (LTV) for a refinance mortgage, and does not have an upward limit for combined LTV (CLTV) if you also have home equity financing in place. FHA does not allow refinancing for more than 97.5% of current home value, but if your home equity lender agrees to subordinate its interest to a new FHA mortgage, you may qualify for FHA refinancing.

Refinancing from Conventional to FHA Mortgage Loan: Things to Consider

Refinancing for any amount greater than 80 percent of your home’s current value requires paying for mortgage insurance (conventional mortgage loans) or FHA insurance. Although insurance premiums are paid by borrowers, the mortgage insurance benefits the mortgage lender in case of default and foreclosure. When comparing your existing mortgage to a potential FHA refinance mortgage, remember to include the cost of mortgage insurance in your estimates. FHA borrowers pay an up-front mortgage insurance premium of 2.25% of the refinance mortgage amount. For a mortgage of $250,000 the UFMIP would be $5,625.00. FHA is requesting authorization to increase the annual mortgage insurance premium rate, and plans to convert some of the UFMIP to the annual mortgage insurance premium amount, which is currently set at .55% of the refinance mortgage amount. For a $250,000 mortgage, the annual mortgage insurance premium is $1375.00, which would be pro-rated monthly and added to your mortgage payments. If you are not currently paying for mortgage insurance, remember to deduct the cost of UFMIP and annual mortgage insurance premiums from estimated savings.

Mortgage Quotes and Mortgage Calculators: Your Tools for Finding Refinancing

Using free mortgage calculators can help with comparing mortgage quotes, and is also helpful for considering various scenarios. When using mortgage calculators, keep in mind that the calculators offer general estimates only. Individual factors, including credit scores can impact the actual cost of your FHA home loan.

FHA Lenders: Helping You Find Mortgage Refinance Solutions

Contact FHA lenders to learn more about available refinance options, and to determine if you can qualify for an FHA refinance mortgage. FHA offers several refinancing options through its approved lenders, including refinancing your existing FHA mortgage through the streamline refinance program. The federal making home affordable refinance program (HARP) may also work if you have little or no home equity, and your existing mortgage loan is held by Fannie Mae or Freddie Mac.

Full post as published by FHA Mortgage Guide on July 08, 2010 (boomark / email).