FHA Loans for Homebuyers
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FHA Refinancing
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Need to Know
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FHA Programs for Homebuyers
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Consumer Guide to FHA Loans
Perhaps you bought your home when rates were higher. Perhaps you have an adjustable-rate loan and would like to
obtain different terms. Perhaps now is the time to consider refinancing your FHA mortgage. Refinancing a mortgage
simply means taking out a new mortgage. The new mortgage will be subject to the same procedures and many of the
same costs the second time around.
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Now is the time for an
FHA HOME LOAN
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Sometimes, refinancing can be worthwhile. Standard wisdom says that refinancing your mortgage makes the most
sense if the interest rate on your mortgage is at least 2 percentage points higher than the prevailing market
rate. Often, depending on your loan amount and other circumstances, it can even make financial sense if your mortgage
rate is only 1.5 percentage points higher than the current rate.
As it generally takes at least three years to realize fully the savings from a lower interest rate, given the
costs of the refinancing, you should consider how long you plan to stay in the house you are about to refinance.
Refinancing can be a good idea if you:
- want to reduce a high interest rate loan for a lower rates, if you intend to stay in the house long enough to make the additional fees worthwhile.
- have an adjustable-rate mortgage (ARM) and now want a fixed-rate loan.
- want an ARM with a lower interest rate or more protective features such as a better rate and payment caps than the ARM they currently have.
- want to build equity more quickly by converting to a loan with a shorter term.
- want to use the equity in their house for a major purchase or expense such as a child's education.
If you decide that refinancing is not worth the costs, ask your lender if you can still obtain all or some of the new
terms you want by agreeing to a modification of your existing loan instead of a complete refinancing.
What Are the Costs of Refinancing?
Application Fee: the initial costs of processing your loan request and checking your credit report.
Title Search and Title Insurance: The cost of examining the public record to confirm ownership of the real
estate. It also covers the cost of a policy, usually issued by a title insurance company, that insures the policy holder.
Lender's Attorney's Review Fees: The lender will usually charge you for fees paid to the lawyer or company that conducts
the closing for the lender. You may also be required to pay for other legal services relating to your loan which are
provided to the lender. You may want to retain your own attorney to represent you at all stages of the transaction
including settlement.
Loan Origination Fees and Points: The origination fee pays for the lenders work in evaluating and preparing your
mortgage loan. Points are prepaid finance charges imposed by the lender at closing and based on the rate on the mortgage.
The total number of points a lender charges will depend on market conditions and the interest rate to be charged.
Appraisal Fee: This fee pays for an appraisal which is a supportable estimate of the value of the property.
Prepayment Penalty: A prepayment penalty on your present mortgage could be the greatest deterrent to refinancing.
The practice of charging money for an early pay-off of the existing mortgage loan varies by state, type of lender,
and type of loan. Prepayment penalties are forbidden on various loans including loans from federally chartered credit
unions, FHA and VA loans, and some other home-purchase loans.
Miscellaneous: You might have a fee for a VA loan guarantee, FHA mortgage insurance, or private mortgage insurance.
One way of saving on some costs is to ask if your current lender will waive some of the standard fees, especially if
the work such as title and appraisals, is still current. In general, plan on paying an average of 3 to 6 percent of
the outstanding principal in refinancing costs, plus any prepayment penalties and costs of paying off any second
mortgage that may exist.
Before you commit to refinancing, discuss your goals and need with your mortgage lender, real estate agent,
attorney, and other financial advisors.
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to Buying a Home with an FHA Loan
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> FHA Step 1
How much can you afford?
> FHA Step 2
FHA says, "Know your rights."
> FHA Step 3
Shop for an FHA loan.
> FHA Step 4
Shop for a place to call home.
> FHA Step 5
Make an offer for the home.
> FHA Step 6
Get a home inspection.
> FHA Step 7
Your homeowners insurance.
> FHA Step 8
Sign on the dotted line and move in.
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Receive cash back and save money when you buy or sell your home.
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Get a VA loan to buy a home, to build a home, to refinance your mortgage, or to simultaneously purchase and improve a home.
VA Mortgage News
Browse through articles about
VA home loan programs,
VA benefits, home buying and selling,
VA mortgage shopping
and insurance.
Pioneer Military Loans
Serving the military community with personal loans from $500 to $10k.
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