FHA government-backed home refinance loans


What You Need To Know About FHA Refinancing And FHA Home Loans

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FHA loans assist low to middle income families in refinancing and purchasing their home.  After the mortgage catastrophe of 2009, even the FHA has raised their credit rating standards when it comes to lending.  However, most families have little or no trouble refinancing or purchasing with FHA refinancing, according to FHA.com.  Keep in mind though, FHA loan limits vary from state to state across the country from a maximum of $729,750.00 in high-cost areas down to $424,100.00 in average-cost areas.

Please note that Peak Home Loans are experts at getting our clients the hassle-free, low cost, little-to-nothing down FHA home loans they desire.  Another thing to remember, most people have better credit than they think, usually Fair Credit or better, keep this in mind while filling out our online form.   When contacted by us, kindly ask our loan professional any question you may have.  They will be more than happy to assist you in finding the best loan, either conventional or FHA, for your particular circumstance.  Remember, all loans don't fit all people; if you need a mortgage loan, we'll find the right one for you.  Please click "Full Application" to get started.

HUD (Department of Housing and Urban Development) is the overseeing branch of government for the FHA (Federal Housing Administration).  The FHA started about 80 years ago for the purpose of helping families of average means to enjoy home ownership.  The FHA also offers an FHA refinance option, says HUD.gov at the home owner will repay the loan.  Therefore, lenders are more likely to offer a loan guaranteed by the FHA, and that loan can often carry better rates and terms than that of a conventional loan.

Features Of An FHA Refinance Or FHA Home Loan

1.) A Lower down payment is required.

  • Only 2.0% required down payment.
  • $2,000 down for every $100,000.00 borrowed.
  • Down payment can come from anywhere:  seller contributions, gifts, loans, etc.  IMPORTANT:  Seller contributions can allow a home buyer to purchase a home with little or nothing down!   Negotiate this early on.  Conventional loans disallow this.

2.) Poor credit often qualifies.

  • Borrowers with a credit score as low as 500 may qualify.
  • A credit score between 580 and 620 is ideal.
  • Borrowers need a 2 year history of on-time bill payments.
  • Borrowers need 2 years of steady employment.

3.) Higher debt to income ratio allowed.

  • Debt to income ratio is as follows:  add all your total monthly payments together, mortgage, credit cards, car loans, etc.   Multiply that by 100%.  Divide that total by your families gross income.  That is your debt to income ratio.
  • Conventional (non-FHA and non-VA) loans allow for a maximum of 36% debt to income ratio.
  • FHA loans (non-conventional) allow for a maximum debt to income ratio of 41%.  For excellent credit, it's 43%.

4.) Mortgage insurance is required.

  • A flat 1.75% of the loan amount at closing - $1,750 for each $100,000 borrowed.
  • Monthly mortgage insurance of 1.25% if your down payment was less than 5%.
  • Monthly mortgage insurance of 1.20% if your down payment was more than 5%.
  • Carry the insurance for a minimum of 5 years.
  • Can drop the mortgage insurance after 5 years and your principle balance is 78% or less than the original purchase price, or original refinance amount.

5.) FHA loan disqualifications.

  • A FICO (Fair Isaac) score lower than 500.
  • A bankruptcy less than 2 years old.
  • A foreclosure less than 3 years old.
  • Owe the federal government money, i.e. taxes, student loans, liens.

FHA home refinancing

Is An FHA Refinance Or Home Loan Right For Me?

You have a choice between a conventional loan and an FHA loan.  As was discussed earlier, FHA loans are easier to qualify for, sometimes have lower rates and better terms, need a lower down payment, but require mortgage insurance which can become expensive.  The bottom line is you will have to speak with a mortgage expert and have them analyze your financial state of affairs.  Individuals in the process of getting their finances together, may want to do just that first, and wait until their finances become more stable before going ahead with an FHA loan, or any type of mortgage.  Many times FHA loans are your best, but there are sometimes they are not.  At Peak Home Loans, we specialize in FHA loans for refinancing and home buying.  If it's a government-backed loan you need; look no further, Peak Home Loans is here to help.