If you are looking to invest in your property and enjoy the benefits year after year, refinancing with an FHA loan will be an investment worth your while. A lender issues a loan insured by the Federal Housing Administration, reducing the risk of loss. This program was instated due to many foreclosures and defaults in the 1930s. The FHA home loan program had stimulated the housing market, making sure homeownership was easily achieved.
Types of Refinance Loan
There are two types of FHA refinancing loan programs. They are (a) the standard rate-to-rate refinance, and (b) the streamline refinance.
Rate and Term Refi
Refinancing any type of mortgage to an FHA loan to lower the interest rate, to shorten the financing term, or both, is what’s referred to as a “rate and term” refinance. It is a common knowledge that the interest rate of an FHA loan is quite lower as compared to any other loan programs in the market. It’s not uncommon to see conventional-conforming mortgage holders refinance to an FHA loan to lower the payment or term of the original loan.
Streamline Refi
A streamline refinancing is refinancing an existing FHA loan to another FHA loan. There are different types of streamline refinance programs: (a) no credit, no appraisal; (b) full credit, no appraisal; and (c) no credit, full appraisal. When an refinancing an existing FHA loan to another FHA loan but requires both full appraisal and a full credit check, that is deem the same as a rate and term refinance.
When refinancing to an FHA loan, there are several things you will need for your application.
Your last 2 years of residence;
Full 30 days paycheck stubs.
Employment information in the last two years;
Two(2) months of the bank statements
Income tax returns for the last years along with w2s, 1099s, etc.;
Having all of these documentation handy will speed up the application process and help achieve better results much faster.
If you want to refinance your mortgage but have minimal equity, the most appealing option to most borrowers is the rate and term refi. It will lower the current rate you are paying now and result in a lower monthly payment. You can change the terms of your loan without losing your hard-earned equity.
FHA refinance allows loan-to-value of up to 97.75%. FHA is a better option than a conventional loan that only allows a maximum of 97% loan-to-value.
When looking to refinance your home, look at all the options available to you. As FHA Loan Specialists, we can provide you with options. You must find one that will fit your needs appropriately. You can reduce your payment and build equity faster by choosing either an FHA Streamline for an existing FHA loan or going with a regular FHA rate and term option.
When applying, make sure you have all the required documentation handy. This will ensure your application goes through with flying colors and closes promptly. Consult any of our FHA Loan Specialists to refinance your home. We will guide you every step of the way. Call us at (281) 801-6965 for more information.