FHA loans are a wildly popular type of home financing for any client who may otherwise struggle to get approval for conventional home financing. Sponsored by the Federal Housing Administration and funded by private lenders, these loans provide a pathway to financing with easy qualifying requirements and fair rates and terms. Many homeowners with FHA loans choose to refinance their loans after improving their credit and overall financial standing, to get better rates and/or terms. This week join Associates Home Loan of Florida, Inc., in learning more about FHA refinance options and see if it’s right for you. We work with clients in Tampa and Sarasota, so please contact us if you’d like to schedule a consultation.
FHA to Conventional Refinance
FHA loans are a type of nonconventional loan, which means they’re insured by the federal government: the FHA. In some cases, clients with FHA loans choose to refinance to a traditional conventional loan for a better rate or term. Conventional loans are not insured by the federal government in any way, which means they pose more risk to private lenders and are thus more difficult to qualify for. To get a rate-and-term refinance from an FHA loan, clients must have good or better credit, a pristine payment history, and documentation showing income history and other financial paperwork. While getting approved for a conventional loan may be more difficult, these loans have some great benefits when compared with nonconventional loans, namely lower interest rates (in most cases) or better terms. Conventional loans also don’t require mortgage insurance after 20% equity is achieved, while FHA loan recipients pay mortgage insurance for the life of their loans.
FHA Cash-Out Refinance
A cash-out refinance is another FHA refinance option for clients in need of cash funds to pay off other expenses. With this type of loan, clients take on a new mortgage worth more than what they currently owe on their existing mortgages. They are paid out the difference in value in cash. In many cases, borrowers not only can get the cash in hand they need for expenses like paying off high-interest credit card debt or college tuition, but they may also secure better terms or rates at the same time. To secure a cash-out refinance, you typically will need a credit score of at least 600 or higher and be in good financial standing. Because they’re higher-value loans, they pose more risk to lenders who have more stringent eligibility requirements.
FHA Streamline Refinance
FHA Streamline refinance saves borrowers money on interest with minimal documentation. This is a type of nonconventional to nonconventional refinancing, as the FHA still sponsors the resulting loan. As a rule, FHA Streamline refinance must financially benefit the borrower, called “net tangible benefit.” To qualify for an FHA Streamline refinance, you must have made at least six on-time mortgage payments on your home and surpassed 210 days since closing. If your loan is less than a year old, you cannot have any overdue payments past 30 days. If your loan is older than one year, you must not have had any late payments in the past 90 days, and no more than one late payment in the past year. You do not have to verify your employment, get an appraisal, or qualify your credit to get approved.
What Option is Right for You?
If you’d like to learn more about different types of FHA refinance, Associates Home Loan of Florida, Inc., is here to help. Our qualified agents love educating borrowers on different types of home financing, and we offer free quotes. We operate in Tampa Bay and Sarasota, FL, so contact us if you’re in the area today.