Fixing Your Mortgage with an FHA Home Loan

With interest rates so low, it would naturally benefit a homeowner to consider refinancing their present mortgage.

To refinance a home, simply put, means that you are using your home to borrow money to pay off your current home loan, thus creating a new mortgage loan. Some may consider this option if they have repairs or upgrades to a home they are living in, but due to financial difficulties are unable to do. By refinancing, if the equity accumulated is over the loan value, the borrowed on the new loan can pay off the mortgage, and the extra funds obtained, can then be used for the needed repairs or upgrades.

More so than this, due to the current real estate market, homeowners are now refinancing to get a lower interest rate on their mortgage. An example of how this would benefit the home-owner, would be: If you are currently making payments on a home that cost $125,000 at purchase, with a 8% interest rate, on a 30 year note, about $300,000 is going to interest, with a monthly payment of around $1,180.

By refinancing at a lower interest rate, and of course depending on the amount of years you have left on the mortgage loan, the difference would be dramatic. $125,000 times a 5% interest rate would have you paying $187,000 for interest, with a monthly payment of about $860.

These estimates are assuming that you have a 30 year note on the first mortgage, and the second example is showing if you had that amount left on your current loan that you would be refinancing, again for 30 years. This of course would not make sense if your current loan is already at a low interest rate, and the majority of your monthly payment was now going toward the principal and not interest.

When considering, all the options available, you may qualify for refinancing into an FHA loan, which could lower your interest rate even more. When obtaining an FHA mortgage, the money for your loan does not actually come from the Federal Housing Administration. The FHA does not lend money. It is an organization that is backed by the government. But they will guarantee the loan to the lender. If the borrower defaults, and cannot pay the loan in its entirety, then the FHA steps in to help cover the cost of the loan.

An FHA home loan can, in most cases, be obtained even when the borrower has less than perfect credit. Current lenders have strict percentages and credit scores that they must adhere to, making it almost impossible for a person who has had financial difficulties in the past to get a home loan with a low interest rate. Although they may indeed get a home loan, more than likely the interest rate will be very high due to the risks involved.

FHA has been serving individuals for 75 years with new home loans as well as refinancing existing FHA loans and helping those with conventional loans in refinancing into an FHA loan. Due to the current real estate market's variations, the Federal Housing Administration has made a commitment to assist current homeowners so they may stay in their home.

Article Source: http://www.articles2use.com - a Rentaccomspain.com company.

At CREFCO, we strive to keep the customer in the loop at all times, so they get the best deal possible and are quickly educated on their options when dealing with their home mortgage. Whether you are looking to purchase a home or refinance your current mortgage, let CREFCO help you: www.crefco.com

Please Rate this Article

5 out of 54 out of 53 out of 52 out of 51 out of 5 

Not yet Rated