In the past it was very common for sub-prime and other loans to be approved at high loan-to-values. The decline of the real estate market nationwide created difficulties for those attempting to refinance out of subprime or ARM mortgages because owners are now upside down--owing more that their home is worth.
Mortgage Delinquency and Refinancing
Now knowing that a delinquent mortgage is virtually impossible to refinance at a decent rate, FHA has stepped in and put together a program for homeowners who are upside down and/or have had mortgage-related payment issues. However, the current lender has to be willing to write down the loan balance or grant a subordinate loan for the difference. Here are major considerations when refinancing into an FHASecure loan :
- Delinquency on Mortgage Contrary to popular belief, you don't need to be behind on your mortgage to qualify for this loan. In fact, FHA encourages homeowners to refinance before they get behind.
- Type of Existing Mortgage The mortgage that's getting you into trouble must be a non-FHA ARM. Interest-only and Options ARMs qualify too as long as your inability to repay the loan is due to recasting your mortgage payment or resetting your interest rate.
- Need You have to have been making your payments successfully before your ARM adjusted--and prove that the adjustment is what caused your mortgage credit problems.
- Loan Amount The loan amount must fall within FHA loan limits for your area, but a first and second mortgage together can exceed those amounts.
The program is advantageous for those with credit problems caused by ARM home loans, making them ineligible for refinancing elsewhere. In addition, most lenders won't refinance a home if the total liens (first and second mortgages) exceed the value of the home--this program allows that. However, you do have to be able to make the new fixed mortgage payment, and you do have to pay the costs of refinancing. Your best bet is to contact a loan professional to see what rates are available and to determine if this program is appropriate for you.
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