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Understanding FHA Refinance
A brief overview
For a lot of individuals just now, they’re trying to make their money work for them, especially for those that are home owners.
With regards to those within the USA, there's a governing body based around this principle; the Federal Housing Administration (FHA) in that they provide insurance of a loan that is brought about by FHA approved mortgage lenders. However, as an obvious form of criteria, you must already have a mortgage taken out on your house before you can take out a further one. Moreover, you can only take out loan from the FHA on your primary residence and therefore it can't be taken out on holiday homes etc.
When it comes to receiving this money, there are several types of FHA Refinance options . However, in order to be eligible for FHA refinance, you must be up to date on your payments before you can take out a loan from the FHA. In the event that there's even a small underpayment on your account then your application for a refinance will be rejected. Similar to this is you have a poor credit rating, or you own a lot of money on credit cards then the likelihood of you getting FHA refinance is severely diminished. Also, in the event that in the past two years you have declared yourself as bankrupt then you normally wouldn't be eligible for a loan. However, in the event that you declared bankruptcy under Chapter 13 and under the provision that you made all your owed repayments on time for the last twelve months then you may be eligible for FHA refinance.
Why should you choose a FHA Refinance loan?
One of the biggest reasons why home owners go down this route is that they have noticed over time that due to the their type of mortgage in that it's not fixed rate (rather, it's in line with inflation) that they are paying out more than what they can actually afford. This in turn has a knock on effect to other aspects of their life, and can even negatively impact their health due to the stress that they’re under.
It may also be the case that you’ve lost your job and you’re in the position that you be facing foreclosure by the bank. By refinancing your home under an FHA regulated loan then it can secure your home and thus giving you more leeway with your savings.
Likewise, if one third of your annual wage contributes to your mortgage repayments over the year then by undertaking a refinance option to properly structure your repayments would be the way to go.
Moreover, national statistics also play an important role on whether or not you should undertake FHA refinance. The reason behind this is that it is now possible to determine if you are earning an average salary or below average salary in relation to your residential area. By assessing this, it will allow you to determine if you can juggle your money and make it work for you in an attempt to prevent you losing your home, or becoming bankrupt.
Preparing for your application
Before you application form is submitted, it’s crucial that you go through all your finances with a fine toothcomb. Not only will you need to know your annual salary before and after tax, but you’ll also need to make sure that your other expenditure is accounted for. This may include any other income that you receive from secondary jobs.
You’ll also need to factor in payments that you may have coming out of your bank each month for goods, such as your car. Linked to this is the amount you’re spending on fuel on average each month as well as how much your yearly car insurance is.
Also, you’ll need to state how much you’re paying each year in medical insurance along with any other bills you’re paying off, such as that for your smartphone contract or your credit card bills.
At this point many individuals may try and mislead the mortgage broker by saying their financial position is actually stronger than it is in order to gain a better loan. However, at this stage it’s much better to be honest otherwise you could end up securing a refinance loan that you’re unable to keep up the payments me.