Refinance Your Mortgage in 2021
Will these low rates last long? Those ready to refinance a home loan into an FHA mortgage may not want to wait too long to find out. The conditions that result in the kinds of historic lows we’ve seen in the last 12 months are not guaranteed and if you’re ready for a loan now, it may be wise to explore your options.
Add to that the fact that FHA loan limits are higher in 2021; these factors make it a very good year to consider an FHA loan even if it’s not a refinance you’re after.
Borrowers have the option to refinance an existing FHA loan or a non-FHA mortgage. You can refinance out of a conventional loan into the government-backed FHA mortgage.
Are you a homeowner seeking a better interest rate and a more affordable loan? Perhaps you want to get out of an adjustable-rate loan and into a lower mortgage rate than a conventional loan? Here are the options you should think about when considering the options.
Get a Better Interest Rate
Refinancing could earn you a better interest rate. Compared to conventional or non-government-backed mortgages, FHA mortgage loans potentially offer a more competitive interest rate. Lower rates are definitely possible using an FHA loan as long as you remember a very important factor here to consider--your credit rating.
The better your credit report looks, the better your FICO score is, the better the rates you are offered may be. Borrowers who apply with excellent credit are offered excellent interest rates by comparison. But you don’t have to have perfect credit to be approved for an FHA mortgage; in cases where the applicant has lower FICO scores or represent an increased risk for the lender, higher rates may be offered.
Refinancing to Get Cash Back
Do you want to convert the equity in your home into cash? FHA mortgage loans include a Cash-Out refinance loan option. Using this loan a borrower can refinance an existing FHA mortgage OR a non-FHA mortgage. How much will you get in cash at closing time? That calculation depends on how much is left over after your original loan is paid off in full, plus other any other expenses which are paid through refi loan proceeds. Cash-out refinance loans require a new appraisal and a new credit check.
Ditch Your Adjustable Rate Mortgage
Do you have an FHA or non-FHA adjustable rate mortgage? Consider refinancing into a fixed rate FHA home loan. You can refinance in this instance using an FHA cash out or no-cash-out refinance loan. The longer you have owned your home and the longer you have paid on your mortgage, the more potential cash back you could qualify for.
Sometimes It Pays to Refinance
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