June 9, 2015
There are lots of articles and blog posts about refinancing your home loan, but many of these are technical; few of them discuss the reasons it might be a good move to consider applying for an FHA refinance loan.
Consider an article written last year by a staff member at Marketwatch.com titled, “Half Of Americans Cant Afford Their House”, which discusses a serious issue among some home owners. According to the article approximately 15 percent of home owners in the United States were said to be in housing markets where the monthly mortgage loan payment ate up more than 30 percent of monthly income.
30 percent is, the article states, the maximum for rent or mortgage loan payments in terms of affordability. Exceeding that 30 percent is not recommended.
Home owners already worried about how to afford those mortgage payments in such housing markets would do well to consider a refinancing loan that can help the borrower get into a lower monthly payment, a lower interest rate, or both.
Some borrowers purchase their homes with a strategy planned out in advance–borrow with refinancing firmly in mind. This strategy can work well when you apply for an FHA home loan thanks to the option known as FHA Streamline Refinancing.
An FHA Streamline Refinance loan gives the borrower the ability to refinance into a lower interest rate and/or mortgage payment with there is no FHA-required credit check or appraisal. (You may find some lenders have a credit check anyway, and one is required by the FHA if the new loan actually raises monthly payments in excess of a certain amount.
FHA loan rules state that for most streamline refinance loans, the borrower is required to get a “net tangible benefit” from the loan in the form of those lower rates or payments. Getting a fixed rate where the previous loan was an adjustable rate is also considered such a benefit.
Streamline Refinance Loans don’t offer cash back to the borrower, but these loans are specifically designed to help the applicant get into a better financial position due to lower payments or interest rates. That can be, in the long run, more important than a quick injection of cash in the short term.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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