How to Find the Best FHA Refinance Loan Programs for Homeowners

 

Just as it did during the Great Depression of the 1930s, the Federal Housing Administration (FHA) is once again offering affordable mortgage loan options for homebuyers, as well as refinance opportunities for homeowners.

It has adapted to the current climate with higher loan limits and programs tailored for both struggling homeowners and qualified homebuyers.

As long as you can document a stable income stream and have managed to maintain decent credit ratings, you will have a very good chance of qualifying for an affordable FHA refinance loan.

About the FHA

The Federal Housing Administration (FHA) was established during the Great Depression of the 1930s to help potential homebuyers and homeowners.

Until the advent of the FHA loans, most home loans in the U.S. were short-term balloon loans that had to be paid off or refinanced when their terms were up… usually in five years or so. When the Great Depression hit, banks started calling in those loans, which resulted in a massive wave of foreclosure.

The FHA introduced the 30-year fixed-rate loan to give homeowners, homebuyers and the American economy a more stable real estate industry. It also offered low-down payment options for home buyers.

Those two elements are key to FHA’s continued appeal today. American homeowners and homebuyers now try to avoid short-term adjustable-rate mortgage (ARM) loans, in favor of more secure 30-year fixed-rate programs. Plus, homebuyers with good income and decent credit are turning to FHA’s low down payment programs to take advantage of huge opportunities.

It’s important to note, however, that the FHA is not really a lender. The FHA loans that bears its name is provided by banks and mortgage companies across the company.

Instead of lending money directly, the FHA guarantees a portion of each FHA loan provided by local mortgage lenders. This FHA guarantee reduces the lender’s risk exposure and ensures that the lender will probably not lose any money by extending FHA loans to qualified borrowers.

Today, the FHA is an integral part of the Department of Housing and Urban Development (HUD).

Comparing FHA Lenders

Not all mortgage companies and banks are authorized to offer or originate FHA loans. And not all FHA lenders are the same.

If FHA mortgage financing seem like the best option for your refinance needs, take the time to shop around for the best deals on FHA loans on the market today. The web makes it incredibly easy to find the right mortgage lender for your needs:

• Competing quotes. With a few clicks of the mouse and a quick form, you can get refinance interest rate quotes from several competing mortgage lenders in your area — in just minutes. This is a good way to determine what the current interest rate levels are, as well as show you how much you can save with an FHA refinance.
• Customer ratings. Before you settle on an FHA-certified mortgage lender, make sure to check on sites like Yelp and Angie’s List for customer reviews on your top choices. The widespread adoption of social media has been driven in part by consumer review sites. Take advantage of these sites to make sure that you can trust your chosen lender.
• Money-saving tips. There are many ways to save hundreds (sometimes thousands) of dollars on your refinance. Unfortunately, most lenders won’t bother sharing these tips with you, because it can come out of their commissions. But our How to Save Money on Your Mortgage Loan article will clue you into these insider secrets.

 

FHA Loan Programs

The FHA loan program offers a variety of different mortgage loans, often with more flexible underwriting standards than standard mortgage loans. These programs include the following:

• Fixed-rate loans. These loans provide the most stable arrangement for homebuyers who want low payments and the security of knowing that they’ll be less likely to lose their home to foreclosure.
• ARM loans. FHA loans are available with adjustable-rate mortgage (ARM) amortization, which can provide lower payments and are ideal for homeowners who don’t plan to stay in their current home for the long term.
• EEM loans. In addition to covering the purchase price or current mortgage balance, Energy Efficient Mortgage loans also finance improvements to the home that will help to lower the homeowner’s utility bills.
• Condominium loans. Certain FHA loans have been designed specifically for the needs of condominium owners and buyers.
• Closing cost assistance. FHA loans still provide mortgage financing with as little 2.5% down, plus it will even finance some of the closing costs.

FHA loan limits do tend to vary by state and county, according to the median home prices in each area. A licensed mortgage broker or loan officer can provide you more information about the restrictions and requirements in your area.