Fha Refinance An Option For Blemished Credit History

With changes in the housing market, the Federal Housing Administration (FHA) has

made some key upgrades to FHA loans, making them more popular than they have ever been. Recently, FHAs maximum loan limits have been raised across the board, too. As housing prices are also in a slump, this can be a good time to refinance with FHA refinance loan. The Federal Reserve recently took action to lower the interest rates for homeowners seeking to refinance with a FHA refinance. FHA refinance is only available to homeowners who are currently using their home as principal residence.

In today's tight lending environment, FHA is often the best choice for borrowers with past credit issues. Bad credit is the unfortunate reality of thousands of homeowners. It can be difficult waiting patiently for your credit score to rebound in order to qualify for a better interest rate from the conventional loan system. Even with bad credit, FHA mortgage loans allow consumers to refinance if they have paid their mortgage payment on time. Though it is advised to be cautious about the timing for refinancing if you have less than perfect score, the amount of refinance can vary. Therefore it may be wise to wait for around six months to rebuild your score.

Again, if your loan is already adjusting (ARM) and your monthly payments continue to rise, then the sense of urgency can be much greater to refinance. If your mortgage rate has not been fluctuating then you have the luxury of waiting for better credit scores or more favorable interest rates.

Let us first list down the benefits of taking up FHA refinancing:

One of the main reasons for people availing mortgage loans from FHA rather than other conventional lenders is that FHA loans are offered at lower interest rates thereby helping homeowners in saving some money each month towards interest.

Again, the mortgages and refinance mortgages offered by the FHA are typically 30 year fixed loans which provide you with the same exact predicable payment for the next 30 years unlike the conventional ARM loans offered by other banks which can have the payments change every month.

A relaxed credit score requirement makes FHA more desirable for those struggling to bring the credit score to a decent level in order to qualify for loan or refinance using the traditional way. Even with bad credit, FHA mortgage loans allow consumers to refinance if they have paid their mortgage payment on time.

You may consider FHA refinancing to refinance your current mortgage to FHA home loans, in order to lower the monthly payment, to consolidate your debts, to get cash out of your home or to obtain fixed rate mortgage or even foreclosure. With FHA refinancing you may be able to pay off Chapter 13 bankruptcies and even refinance your mortgage if you are still in consumer credit counseling.

To avail these benefits, consider the factors that determine whether you qualify for FHA refinancing loan. To be eligible your monthly housing cost (mortgage principal and interest, insurance and property taxes) must meet a specified percentage of your gross income (roughly 29%). A minimum credit score of 580 is required to obtain FHA approval. Other than consistent income, another ratio which is taken into consideration is income to additional monthly debts such as credit card monthly minimum payments, car payments and student loan payments which should not exceed 41% of gross income.

Even in todays credit crunch, a FHA refinance loan can provide you with the best opportunity to accomplish your financial goal of converting your adjustable rate (ARM) into secured fixed rate mortgage (FRM) for 30 years without worrying about your credit rating and FICO score.

by: Ask Bill

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