Mortgage Refinance Guide

The FHA Secure mortgage program helps homeowners who are falling behind on their Adjustable Rate Mortgages and could be risking foreclosure. This program is currently limited to homeowners that purchased their homes with Adjustable Rate Mortgages scheduled to reset; however, it could be expanded in the future to include homeowners with Fixed Rate Mortgage loans.

Risky Adjustable Rate mortgages are causing many Americans to fall behind on their payments and are contributing to a record number of mortgage foreclosures in this country. Homeowners that have fallen behind on their payments typically have a difficult time refinancing their loans because they are unable to qualify for a new mortgage. FHA Secure refinancing allows these homeowners to qualify for low interest rate, government insured, fixed rate mortgage loans.

FHA Secure mortgage loans are insured by the government; however, these loans are made through conventional mortgage lenders. These lenders are required to follow FHA guidelines for underwriting mortgage loans and you will have to get a new appraisal on your home. The downside of refinancing with an FHA Secure loan is that you will be required to pay for Private Mortgage Insurance and the premiums will be based on your past credit history. Private Mortgage Insurance lowers the risk of administering this program for the FHA; homeowners with poor credit ratings will be required to pay higher premiums than those with good credit ratings.

The FHA hopes to help 80,000 homeowners with this program and more when the program is expanded. If you are considering refinancing with an FHA Secure mortgage you will need to do your homework and shop for a mortgage that does not include unnecessary markup of your interest rate and junk fees. Many homeowners think that because they are getting a mortgage from the FHA they don’t have to worry about lenders taking advantage of them; however, this is simply not the case. Banks still charge Service Release Premium and wholesale lenders still pay Yield Spread Premium on mortgage loans insured by the FHA.

If you’d like to refinance your home with an FHA Secure mortgage without getting ripped off by a predatory mortgage lender, register for a free video tutorial. Get started today, these videos are yours free with no obligation and will show you how to avoid foreclosure by refinancing your mortgage with an FHA Secure mortgage with a wholesale mortgage rate.

Until recently FHA mortgage loans have been slipping into obscurity. Congress has even been talking about doing away with the FHA program; however, the recent meltdown of the sub-prime (bad credit) mortgage industry has brought FHA insured mortgage loans back into the spotlight. President Bush has proposed expanding the FHA program this year (FHASecure) to assist homeowners that are struggling with Adjustable Rate Mortgages they cannot afford. If you are considering refinancing your home with an FHA insured mortgage loan here are several tips to help you decide if this type of mortgage is right for you.

FHA mortgage loans are insured by the Federal Housing Administration. The FHA does not lend money; they simply insure your debt. If you qualify for an FHA mortgage your loan will be funded by a conventional mortgage lender. Because your mortgage is insured against default by the government, FHA loans offer significantly less risk for lenders, allowing homeowners, even those with poor credit to qualify for lower mortgage rates.

FHA Mortgage Guidelines

The FHA will accept homeowners with blemished credit… especially if you are working on improving your finances and can document your current situation. There are limits to the amount you can borrow which vary by region of the country but will not exceed the conforming loan limit. In 2007 this conforming loan limit is $417,000. The FHA will not insure interest-only or option Adjustable Rate Mortgages…and probably never will.

If you are a homeowner with tarnished credit and are concerned that the current “mortgage crisis” will prevent you from refinancing before your lender begins adjusting your interest rate and payment amount, FHA backed mortgage refinancing could be your answer.

How is The FHA Program Expanding?

President Bush announced that the FHA program will be expanded to help nearly 250,000 families refinance their mortgages. This program, called “FHASecure” is geared specifically to homeowners that have kept their existing mortgage payments current and have fair or better credit histories. The Federal Housing Administration will also begin risk-based premiums where homeowners with poor credit will pay more for the insurance and these new FHA rules start January 2008.

FHA loans had become increasingly less popular due to the abundance of sub-prime financing available to homeowners with poor credit. The recent implosion of the sub-prime mortgage industry has left many homeowners with poor credit histories unable to qualify for mortgage refinancing. This has created a strong demand for FHA backed mortgage loans.

FHASecure mortgage refinancing will fall under the same rules as the current FHA mortgage program. Homeowners looking to refinance their mortgages under FHASecure will have to meet the program requirements and pay mortgage insurance premiums. These premiums reduce the risk incurred by the Federal Housing Administration when guaranteeing loans made to homeowners with poor credit.

Charging homeowners with poor credit higher premiums on their mortgage insurance will allow the FHA to insure homeowners that would not otherwise qualify due to adverse credit histories. These loans will require that taxes and insurance be paid in escrow to further reduce the risk of foreclosure. Pre-payment penalties or teaser rates are not allowed with FHA backed mortgage loans; however, you still have to worry about Yield Spread Premium…more on this later.

The basic criteria for qualifying for an FHASecure loan is that you must have a history of making your monthly mortgage payment on-time before your loan reset or is scheduled to reset. Your loan must have reset or be scheduled to between June of 2005 and December 2009. You must also be employed, be able to demonstrate a history of employment and have the income necessary to keep your mortgage payments current.

The FHASecure program is intended to help homeowners that may have been tricked into expensive Adjustable Rate Mortgages with teaser interest rates. The agency hopes that the program will bring stability to the mortgage market offsetting the current crisis that threatens to drag the US economy into a recession.

Buyer Beware Still Applies

Many people think that because they qualify for FHA mortgage insurance they don’t have to worry about lenders taking advantage of them. Unfortunately this is simply not true… FHA mortgages are originated like any other loan and are subject to the abuse of Yield Spread Premium. If you’re not already familiar with Yield Spread Premium this is the unnecessary markup your broker adds to your mortgage interest rate to receive a commission from the lender. This markup is frequently added without the borrower’s knowledge or consent.

When you refinance your mortgage with a conventional mortgage loan or one insured by the FHA you will need to find a broker willing to work for a reasonable origination fee without charging you Yield Spread Premium. Negotiating on this simple point could save you hundreds of dollars every month in unnecessary mortgage interest. If you’d like to learn more advice about refinancing with an FHA insured mortgage loan without paying too much, register for this free mortgage refinancing blueprint.

VA and FHA mortgages are government insured loan programs intended to help those with low income and veterans purchase homes. Because these loans are insured by the Federal government they have less risk for mortgage lenders allowing people that might not otherwise qualify to purchase homes. Traditional mortgage loans are also insured; however, they are not insured by the Federal government but by lending institutions like Fannie Mae and Freddie Mac.

FHA mortgage loans are underwritten and insured by the Federal Housing Administration. These loan programs are typically for first time homebuyers with credit problems and require a minimum three percent down payment. Closing costs can be rolled into the loan balance with FHA programs; however, there are mortgage insurance premiums of up to 1.5% required by the housing administration. There are also borrowing limits imposed on FHA loans that vary based on the State the home is purchased.

VA mortgage loans are underwritten and insured by the Veteran’s Administration for individuals that have served in the armed forces of the United States. Unlike the FHA, the VA does not require mortgage insurance or a down payment. VA mortgage loans carry a funding fee of 2.15 percent and this fee can be rolled into your mortgage balance along with closing costs.

FHA and VA Mortgage Loans Losing Popularity

FHA and VA loans are becoming increasingly less popular and Congress has even considered doing away with these programs since 1995. One reason these loans are becoming less popular has been the abundance of loan programs available for homeowners with poor credit or little or no down-payment. Many of these programs do not have lender fees or mortgage insurance requirements.

It is possible to find 100% financing without paying insurance or rolling fees in with your closing costs. The recent credit crisis in the United States could bring FHA and VA loans back into favor as qualifying for a mortgage loans becomes increasingly difficult for homeowners with “bruised” credit ratings.

What is Streamline Refinancing?

FHA and VA loans allow for “streamline refinancing.” This means that you can refinance your mortgage with minimal documentation and underwriting without paying lender fees. The basic requirements are that you not be delinquent in your mortgage payments, that refinancing results in a lower payment, and that you cannot receive cash back from refinancing the loan.

There are a number of different mortgage programs available for streamline refinancing. Many lenders charge a higher mortgage interest rate for rolling closing costs into your loan balance. This is why comparison shopping and having a current appraisal is important before you apply for streamline refinancing. You can learn more about your mortgage refinancing options, including expensive mistakes you’ll want to avoid with my free mortgage toolkit.