There are pros and cons to FHA home loans and depending on your financial situation it may be beneficial to switch to an FHA loan. The downside to know about when considering an FHA refinance is the requirement that you pay for mortgage insurance. Here are several tips before you refi from MortgageLoan.com to help you decide if FHA mortgage refinancing is right for you:
An FHA refinance offers a number of attractive features, including low equity and credit requirements, as well as competitive interest rates. Cash-out refinancing is available for borrowers with sufficient home equity, and you can even borrow money for home improvements and repairs against the projected value of the improved property.
The advantages of an FHA refinance include combining your first and second mortgage, the ability to refinance even if you’re underwater, the option to refinance again with FHA streamline, (no income verification, credit check, or loan-to-value considered). The disadvantage of any FHA refinance is the cost. Mortgage insurance and fees are going to set you back more than if you refinance with a conventional home loan.
FHA mortgage insurance premiums typically run 1.1% of your home loan amount if your loan-to-value ratio is better than 95% or 1.15 if it’s worse. The premiums are calculated annually and then prorated for the year in your monthly payment effectively raising the APR for your home.
You can learn more about your mortgage refinancing options for getting today’s lowest refinance rates without paying lender junk fees by checking out my free Underground Mortgage Videos.