What Are FHA Refinance Rates?

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FHA Refinance Rates

What Is FHA Refinance?

FHA refinance refers to refinancing an FHA loan where the interest rate is changed and/or one or more terms associated with the loan. FHA, which stands for the Federal Housing Administration, is also part of the U.S. Department of Housing and Urban Development. The category of FHA loans was introduced in the 1930s to boost the sale of homes. 

FHA refinance rates and FHA loans are made available to borrowers that have less than 20% for their down payment. Since the down payment is lower, every FHA mortgage holder must pay into what is known as an FHA-run mortgage insurance fund. This will require payment upfront. Some lenders allow the borrower to include this payment into their loan amount and their monthly payments for insurance. The amount required will vary according to the down-payment percentage. 

For those interested in FHA refinance, it is important to observe FHA refinance rates, as they often fluctuate. There are also many variables to think about when deciding between 20-year or 30-year FHA refinance rates or conventional mortgage rates. 

Both types offer variable- and fixed-rate mortgages. The interest rate also varies according to the FHA lender chosen, the market, and the credit score of the borrower. 

The FHA refinance rates available today can be beneficial for the borrowers that think they won't qualify for loans. Borrowers that have less-established or lower credit, and buyers looking for a loan where they can put a lower deposit down, can all benefit from an FHA loan. 

What Is FHA Streamline Refinance?

FHA streamline refinance is a simplified way to replace an existing FHA loan with a new loan to reduce monthly payments and the interest rate on the loan. These loan types involve minimal paperwork and simple requirements. They allow the borrower to skip a credit check, but payments on the mortgage must be up-to-date and paid on time over the past 12 months. There is also no requirement for verification of income or having to recalculate the borrower's debt-to-income ratio. 

The Pros Of FHA Refinance

FHA refinance loans are beneficial for several reasons. They often translate into low monthly payments, low-interest rates, and in some cases lower monthly insurance payments on the mortgage. 

The Drawbacks Of FHA Refinance

A no cash-out or simple FHA refinance is when all the proceeds of the new FHA loan will only go toward paying off the existing FHA loan along with costs associated with that transaction. The borrower will only be able to refinance the "principal balance" or possibly even less. 

In comparison, with a cash-out FHA refinance, the borrower can take advantage of the option to withdraw cash, since they have already paid a significant portion of the mortgage. It is also important to know that most lenders require a high credit score to qualify for a cash-out refinance. The minimum credit score is usually 600 to 660 and in some cases even higher. When it comes to FHA cash-out loans, the maximum loan-to-value is 80% according to the latest appraised value.

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