| When home mortgage refinance rates fall then | | | | While most FHA loans are directed towards helping |
| refinancing home mortgages becomes very attractive. | | | | people buy their first home, they can also be used to |
| But why is it that you can never seem to get the | | | | refinance existing loans. One of the most practical and |
| lowest rates advertised? That $1,500 monthly | | | | smart ways to save money, gain equity and pay off |
| payment on your 6% 30-year $250,000 mortgage loan | | | | debts is by refinancing a high interest rate loan with a |
| is making you choose between paying your mortgage | | | | new low interest rate FHA loan that can save a |
| and paying for your groceries. If only you could find a | | | | person hundreds of dollars a month. Note that neither |
| way to refinance with a 5% rate you could be paying | | | | HUD nor the FHA actually lend you the money, that is |
| $1,300 a month instead, or even a 4% rate that could | | | | still done by a conventional financial institution. HUD and |
| cut your monthly payment to $1,200 a month. That | | | | FHA simply insure the loan for the lender. So if the |
| extra $300 could pay for a lot of groceries for your | | | | house is foreclosed upon, the U.S. Government will pay |
| family each month. Well... keep reading and find out | | | | the financial institution and then own the house. |
| how to get those lower rates. | | | | The FHA was created in the Great Depression and is |
| Conventional home mortgage loans will not usually | | | | becoming very useful now during the current |
| offer the best home mortgage refinance rates due to | | | | recession. Many home owners are now finding |
| the high risk lending institutions take by making these | | | | themselves in financial crisis and refinancing their |
| loans. While it is true that the lender has collateral in the | | | | mortgage loans with FHA loans. The lower FHA loan |
| value of the property, as we have seen in these last | | | | interest rates is how they are lowering their monthly |
| few years real estate prices can sometimes fall | | | | payments and saving their homes. |
| dramatically. Property foreclosures have made the | | | | There are many benefits to FHA loans: |
| FDIC (Federal Deposit Insurance Corporation) take | | | | - Qualifying for an FHA loan is much simpler than a |
| over hundreds of failing banks in the last few years. | | | | conventional loan, which means refinancing using an |
| Many homes had dropped in value so far that they | | | | FHA loan is both quicker and easier. |
| were no longer worth as much as what was owed on | | | | - Bad credit will usually kill approval for a conventional |
| them. Many home owners had to walk away from | | | | loan, but usually does not affect FHA loans. |
| their homes. Lenders simply could not guarantee that | | | | Remember, the U.S. Government is insuring the loan so |
| they would get their money back by foreclosing | | | | the lender cannot lose money on the loan. |
| anymore. So the higher risk is making lenders increase | | | | - Down payments for conventional loans usually have |
| their interest rates to compensate. | | | | high down payments exceeding 20% of the loan value. |
| So... that explains why you cannot seem to get those | | | | FHA loans have down payments as low as 3% |
| low advertised rates. But wait a minute, some people | | | | leaving you more money to use for other things... like |
| are getting those rates from somewhere. Those low | | | | buying groceries. |
| rates are coming from a special type of mortgage | | | | Of course, the greatest reason people choose FHA |
| loan known as an FHA (Federal Housing | | | | refinance loans is the lower interest rates. FHA loans |
| Administration) loan. The U.S. Government Department | | | | have so many benefits because federal law |
| of Housing and Urban Development (HUD) works with | | | | determines what goes into the loan contract instead of |
| conventional lenders to insure mortgage loans so the | | | | the financial institution. And since almost anyone can |
| lending institution is protected from the costs of | | | | qualify for an FHA loan, why not make some calls |
| foreclosure. This allows the interest rates to be | | | | yourself and see if you can reduce or eliminate some |
| reduced for the borrower to the absolute minimum | | | | of your monthly financial pain. |
| possible. | | | | |