Can you improve your money situation by remortgaging with an FHA-insured loan? For many people, the answer is yes.
You probably already know that FHA mortgages are not for the rich and perfect-credit-score people. You probably also know that FHA has different rules than the banks, more relaxed rules. But that’s not all there is to FHA mortgages, remortgages and refinances.
First banks don’t have to do any FHA home loans and they do not have to give you one even if you meet all FHA criteria. That said, a lot of banks do give FHA-insured mortgages and remortgages all the time. The loans are insured!
Here is how it works: Borrowers pay 2.25% upfront mortgage insurance and a small monthly insurance payment (0.50% to 0.55% a year or around $40 per month for every $100,000 you borrow). They can borrow up to 97% of the value of their home if their credit score is 580 or higher. The limit is 90% of a home’s value if the credit score is less than 580.
As mentioned above, banks don’t have to give you an FHA-insured mortgage loan even if you meet all of FHA’s criteria. So, if your credit is very low, some banks will say no. Still, there will be banks that will lend to you.
FHA insures only primary homes. That means that you cannot use as collateral a property that you rent, or where a relative lives, or your summer home. If you have two homes, you can get an FHA-insured home on the one you live the larger part of the year.
The primary home can be a condo, a house, a townhouse, a building with up to 4 apartments.
Since FHA was created to help people who do not qualify for conventional mortgages, FHA imposes a limit on the amount that can be borrowed. In some counties the limit is higher than in others. The limit is not the same every year (keeps up with values). This is the link to HUD’s (Department of Housing and Urban Development’s) webpage with loan limits: https://entp.hud.gov/idapp/html/hicostlook.cfm. Select the year you’re interested in, then the state, then scroll down till you find your county.
So, FHA mortgages (remortgaging or getting one the first time) cost more than conventional mortgages and remortgages but they allow people who do not qualify for regular mortgages and remortgages to get them.
Once you’re done remortgaging, if you did get an FHA-insured mortgage or remortgage, there’s another benefit: the FHA Streamline Program.
FHA’s Streamline Program is a newer program that applies only to people who already have an FHA-insured mortgage. Remortgaging or refinancing under this program is done without a new appraisal, or verification of income or of credit. To qualify for this program you have to have paid on time for the 12 months prior to applying.
It seems that FHA has learned that if you’ve qualified once for an FHA-insured mortgage loan and have been making payments on time, you’re a good risk still. And since you’re a good risk, they don’t have to strain your nerves or their resources.
To get the best bad credit remortgage, you need to have a lot of information about mortgages and remortgages. Even if you’re working with the best mortgage broker or mortgage lender, you can get a better remortgage if you know more about the process. Great remortgages are the result of knowledge.