With the recent turmoil resulting from sky rocketing adjustable rate mortgages (ARMs) many people are looking for a way to refinance from their current adjustable rate mortgage to a fixed rate mortgage. For a large number of individuals, refinancing may be the only way to not lose their homes. Although not for everyone, there is the possibility for the FHA to assist a large number of people through refinancing.
The ideal candidate for an FHA refinance is an individual who already has an FHA home loan. Homeowners may choose to do this to switch from an adjustable rate to a fixed rate mortgage, to cash in on the equity the house has accrued or to consolidate multiple debts. One refinance option that is only available to those who already have an FHA loan is a streamline refinance. There is not a cash-out option available with a streamline refinance, but there are other great benefits. Streamline refinancing allows for less documentation and underwriting, reducing refinancing costs. There are still costs involved, but borrowers can pay them up front or accept a slightly higher interest rate to cover costs. A streamline refinance must lower monthly interest payments and loan principal.
For those who do not already have an FHA insured mortgage (and those who do) there are regular refinancing possibilities. Borrowers can opt for a cash-out or non-cash-out refinance, among other choices. Because of FHA loan limits this is usually only an option for people with relatively low loan amounts. However, if pending legislation is passed FHA loan limits could be raised significantly, making FHA refinancing an option for millions of Americans.