Refinance Advice During a Financial Setback
What does this mean?
For starters, refinance loans generally require a minimum amount of on-time mortgage payments. If you start missing payments before you apply for a refinance loan, you jeopardize your ability to get that loan application approved.
It is incredibly important to reach out to your loan officer the moment you know you may have trouble making ends meet; the earlier you work with the lender to avoid loan default and eventual foreclosure, the more options you have.
In other words, start talking to your creditors BEFORE you start missing payments.
FHA Refi Loan Options for Lower Payments: Existing FHA Mortgages
If you have an existing FHA mortgage, talk to your lender about the FHA Streamline Refinance loan program which generally requires some tangible benefit for the borrower such as lower payments, getting out of an adjustable rate loan, a lower interest rate, etc.
It is best, as mentioned above, to explore this option before you miss any payments on your mortgage. Your ability to qualify for a refinance loan is hurt by missed or late payments so talk to a lender about the FHA Streamline loan option as early as possible. That said, there are two types of FHA Streamline Refinance loans; one is the credit-qualifying version, the other is a no-credit qualifying version.
Remember that your lender’s willingness to do an FHA Streamline Refinance without a credit check does not mean the lender won’t check to see your mortgage payment record, so keep the “no missed payments” advice in mind in such circumstances.
Your lender will not let you skip payments on a refinance loan with an FHA mortgage, so don’t anticipate getting to stop making payments between one loan and the refinance loan.
FHA Refi Loan Options for Lower Payments: Non-FHA Mortgages
There are many variables that may affect your mortgage payment when refinancing out of a non-FHA loan into an FHA mortgage. You will need to ask your loan officer to help you run the numbers but in general, FHA loans feature lower interest rates than some conventional mortgages so your savings may be initially reflected in the lower rate.
If you specifically need a lower payment, it is best to pay as much up front for closing costs as possible rather than financing the FHA costs you are permitted to include into the loan amount. When refinancing a non-FHA mortgage, tell your loan officer your goals for a lower payment and see what options work best for your specific needs.
FHA refinance loans for non-FHA mortgages include cash-out, no cash-out, rate-and-term and simple refinance options.
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