Calling struggling homeowners: FHA may rescue you

Trapped in heavy mortgages and foreclosures, many homeowners are struggling hard in recession to save their property. Job layoffs and mounting debts are further aggravating the agony. This seems to be the perfect time, when people should benefit from the elixir, FHA mortgage refinancing.

A federal assistance mortgage loan in the United States, FHA loan is insured by the Federal Housing Administration and may be issued by federally qualified lenders.

In its beginning years, it was meant to allow Americans with lower incomes to borrow money to purchase a home that they would otherwise not be able to afford. But with private mortgage insurance (PMI) companies getting into housing, FHA now is primarily meant for people who cannot make down payment or do not qualify for PMI otherwise.

FHA has been insuring many mortgage loans through the Federal Housing Administration, since 1930’s. FHA has been helping both lenders and borrowers by funding the loans from commercial lenders.

Refinancing FHA mortgage loans can help those who have mortgages to be adjusted in the next 12 months and who cannot ensure monthly commitments owing to job insecurity. Refinancing your current home loan with FHA refinance can eventually lower your monthly commitment.

Qualified borrowers can benefit from this scheme on ‘no cost’. In "no cost" refinance, the lender will charge a higher interest rate and pay any closing costs or other costs incurred during the transaction, if the borrower pays or refinances any closing costs. Under another option, the closing costs would be included in the new mortgage amount, but there should be enough equity in the house on the appraisal.

Refinancing can also be availed without house appraisal at the loan amount not exceeding the original one. In case the property mortgaged is just an investment property, refinancing can occur only without appraisal.

Given that the interest rates now are lower than any time in the near future, people can refinance their home loans at lower rate than what they have paid earlier for the original loan. Many economists believe the interest rates are at the lowest they will go. If the rate of current loan is higher than the FHA’s offer, people should welcome this wise move as it would mean saving.

With low monthly payment ensured by the FHA refinancing, people could secure more of their money with banks and have more to spend on their daily needs. To cut down on the monthly payments, simply extend the term of the loan.

One easily qualifies for FHA refinancing, if he or she already has an FHA insured mortgage. The process requires nominal cost and documentation.

However, if the current mortgage rate is already lower as compared with FHA’s offer, then refinancing may not be in one’s best interest. Also, one may need to boost his credit first if it is very poor, before he could head for refinancing. Should the foreclosure reach its final stage, then refinancing may not be available.

It is advisable to consult the FHA specialists before making any final decision on refinancing. The specialists would guide better if one qualifies or not and may even help in avoiding foreclosure.