Refinance with an FHA Loan

Many loan options are available when considering a home loan refinance. One type of loan available is the FHA Refinance loan. There are many benefits, including relaxed qualification requirements, low down payment, and possible lower interest rates.

Qualifying for an FHA Refinance is easier than qualifying for a traditional loan. You do not have to have perfect credit. The FHA provides lenders a payment guarantee in the event of foreclosure. This allows a lender more freedom to provide a loan that would otherwise not be as stable.

FHA loans only require a 3% down payment as opposed to the common 20% amount of the loan. The FHA allows the 3% down payment be gifted to you where as the lender for a traditional loan may not allow this. Since the FHA allows the use of a gift for the down payment, you can use money borrowed given or loaned to you by a friend or relative.

Lower interest rates are available when choosing an FHA Refinance loan. Since the FHA guarantees these loans, the risk of money lending is lessened. The lender can then offer a lower fixed term interest rate since they are guaranteed repayment from FHA if a borrower defaults on a loan.

These aren’t the only benefits to choosing an FHA refinance. The FHA provides additional services. The FHA stays with the loan through the life of the loan, different from traditional loans that may be sold to other companies. If you find you are in a financial crunch, the FHA will work with you to avoid foreclosure. There are programs available to you from the FHA that will assist you in times of financial crisis.

You can also use the loan refinance to include some costs for home improvement. The home improvements can also include improvements to make your home more energy efficient.

To learn more about an FHA Refinance, contact the Department and Housing of Urban Development.