Mortgage Refinance Guide

You may have found this site searching for information on current FHA rates. Finding out about government programs to refinance your home can be confusing, especially if you don’t know where to start. FHA programs are government insured loans; there are no set FHA mortgage rates…finding an accurate source for rate information becomes more difficult because mortgage rates are almost never what they seem. Here are several tips to help you refinance your home loan without being taken advantage of by the lender.

FHA Mortgage Rates

If you qualify for an FHA loan to refinance your mortgage the rate you qualify for is set by the lender behind your loan. Because FHA loans are backed by the government you’ll be required to purchase Private Mortgage Insurance to protect the lender and government from loss if you default on the loan. What you might not know is that the mortgage rate you’re approved includes markup by the person arranging your loan for a commission. This commission is called Yield Spread Premium and could raise your monthly payment by several hundred dollars unless you know how to avoid it.

Yield Spread Premium & FHA Mortgage Rates

To get an FHA mortgage you’ll need to find someone to arrange the loan for you. This person could be a mortgage company or broker and with the exception of FHA streamline refinancing you’ll be required to pay closing costs and other fees for the loan. What you shouldn’t get stuck paying are the hidden costs created by Yield Spread Premium. FHA loans are no different from conventional loans in the way that they arranged…understanding how the person arranging your loan is paid will help you avoid paying too much when refinancing.

Yield Spread Premium is the commission the person arranging your loan receives for marking up your mortgage rate. When your FHA loan was approved the lender approved you for a certain mortgage rate. The broker marks this rate up because the lender pays them a bonus of 1% of your loan amount for every .25% they markup your rate. This markup is paid in addition to any fees you’re already paying for loan origination.

It is possible to refinance your home with an FHA backed mortgage without paying for Yield Spread Premium. There are brokers willing to work for a 1% origination fee without marking up your rate. You can learn more about finding the right mortgage broker without paying junk fees or unnecessary markup by registering for my free video tutorial. Register today; the videos are yours with no obligation.

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.

I have been answering a number of questions regarding President Bush’s expansion of the FHA loan program with FHA Secure. I’ve decided to consolidate these questions into an FHA Frequently Asked Questions (FAQ) that will be updated frequently as the program develops.

Who is FHASecure Intended to Help?

There are currently just over two million American homeowners with Adjustable Rate Mortgages scheduled to reset over the next four years. The Federal Housing Administration estimates that that this program could help 240,000 homeowners refinance their mortgage loans. If your mortgage is scheduled to reset and you will no longer be able to afford the payments, FHASecure could help you refinance with a government insured, conventional mortgage loan.

How soon can I apply for FHASecure mortgage refinancing?

The Federal Housing Administration began accepting applications on September 5th, 2007 and the program will run through December 31st of 2008.

Do my payments have to be current before I apply?

In order to qualify for FHASecure mortgage refinancing you must pay your mortgage payments on time for six months prior to your Adjustable Rate Mortgage’s scheduled rest. This is not the only requirement, you must be employed and have sufficient income and work history to qualify. FHASecure will charge you a mortgage insurance premium amount based on your credit rating once you’re approved.

What are the requirements for FHASecure mortgage refinancing?

The basic requirements are that you have a non FHA mortgage that has already reset or is scheduled to be reset. You must show that prior to the reset you were making your mortgage payments on time for at least six-months prior to your loan’s reset. There are provisions for homeowners who have missed payments or have poor credit if they have built up enough equity in their homes to qualify. “Reset” means that your lender will be adjusting your mortgage rate and raising your mortgage payment.

Can interest-only and option Adjustable Rate Mortgages be refinanced under FHASecure?

Yes, any Adjustable Rate Mortgage as long as it is not an FHA insured loan can be refinanced with FHASecure. Fixed rate mortgages are currently not eligible for the program but could be added at a later date.

If I’m not behind on my payments can I still refinance with FHASecure?

FHASecure is intended for homeowners that are behind on their mortgage payments because of a scheduled interest rate adjustment on their loans. If you’re not behind on your mortgage payment you could still benefit from a standard FHA mortgage which could get you a lower mortgage interest rate.

What is the maximum I can borrow with an FHASecure loan?

The amount borrowed cannot exceed the conforming loan limits set by Fannie Mae. In 2007 this amount is $417,000.

Can I take out an interest only or option Adjustable Rate Mortgage with an FHASecure Loan?

No. The FHA will not insure interest only or payment option Adjustable Rate Mortgages..and they probably never will due to the risks associated with these Adjsutable Rate Mortgages.

What are FHASecure Mortgage Insurance premiums?

When you take out an FHASecure mortgage loan you will be charged a monthly mortgage insurance premium. This mortgage insurance reduces the risk for the Federal Housing Administration allowing the agency to cover homeowners with poor credit. The amount you pay for your mortgage insurance premium depends on your credit. Homeowners with poor credit will pay more than homeowners with good credit.

If you would like to read more refinancing advice, please register for our free mortgage refinancing blueprint.

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.