What to Know about FHA 203K loans

Buying a fixer-upper is sometimes romanticized by pop culture. While it’s fun to dream, the reality of home renovation is that it can be laborious and draining, especially if the home needs serious help.

Repair work requires energy and resources, and it can be difficult to secure a loan to cover both the value of the home and the cost of repairs—especially if the home is currently uninhabitable. Most lenders won’t take that sort of chance.

But if you have your heart set on buying a fixer upper, an FHA 203(k) loan can help.

The Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD), insures loans for the purchase and substantial rehab of homes. It is also possible to take out an FHA 203(k) loan for home repairs only, though it might not be your best option if that’s all you need.

If you have the vision to revive a dreary house, here’s info about FHA 203(k) loans and other home improvement loan options.

What Is an FHA 203(k) home loan?

Section 203(k) insurance lets buyers finance both the purchase of a house and its rehabilitation costs through a single long-term, fixed- or adjustable-rate loan.

Before the availability of FHA 203(k) loans, borrowers often had to secure multiple loans to obtain a mortgage and a home improvement loan.

The loans are provided through HUD-approved mortgage lenders and insured by the FHA. The government is interested in rejuvenating neighborhoods and expanding homeownership opportunities.

Because the loans are backed by the federal government, you may be able to secure one even if you don’t have stellar credit. Rates are generally competitive but may not be the best, because a home with major flaws is a risk to the lender.

The FHA 203(k) process also requires more coordination, paperwork, and work on behalf of the lender, which can drive the interest rate up slightly. Lenders also may charge a supplemental origination fee, fees to cover review of the rehabilitation plan, and a higher appraisal fee.

The loan will require an upfront mortgage insurance payment of 1.75% of the total loan amount (it can be wrapped into the financing) and then a monthly mortgage insurance premium.

Applications must be submitted through an approved lender .

What Can FHA 203(k) Loans Be Used For?

Purchase and Repairs

Other than the cost of acquiring a property, rehabilitation may range from minor repairs (though exceeding $5,000 worth) to virtual reconstruction.

If a home needs a new bathroom or new siding, for example, the loan will include the projected cost of those renovations in addition to the value of the existing home. An FHA 203(k) loan, however, will not cover “luxury” upgrades like a pool, tennis court, or gazebo (so close!).

If you’re buying a condo, 203(k) loans are generally only issued for interior improvements. However, you can use a 203(k) loan to convert a property into a two- to four-unit dwelling.

Your loan amount is determined by project estimates done by the lender or the FHA. The loan process is paperwork-heavy. Working with contractors who are familiar with the way the program works and will not underbid will be important.

Contractors will also need to be efficient: The work must begin within 30 days of closing and be finished within six months.

Mortgage LoanMortgage Loan

Temporary Housing

If the home is indeed unlivable, the 203(k) loan can include a provision to provide you with up to six months of temporary housing costs or existing mortgage payments.

Who Is Eligible for an FHA 203(k) Loan?

Individuals and nonprofit organizations can use an FHA 203(k) loan, but investors cannot.

Most of the eligibility guidelines for regular FHA loans apply to 203(k) loans. They include a minimum credit score of 580 and at least a 3.5% down payment.

Applicants with a score as low as 500 will typically need to put 10% down.

Your debt-to-income ratio typically can’t exceed 43%. And you must be able to qualify for the costs of the renovations and the purchase price.

Again, to apply for any FHA loan, you have to use an approved lender. (It’s a good idea to get multiple quotes.)

Home Improvement Loan Options

The FHA 203(k) provides the most comprehensive solution for buyers who need a loan for both a home and substantial repairs. However, if you need a loan only for home improvements, there are other options to consider.

Depending on the improvements you have planned, your timeline, and your personal financial situation, one of the following could be a better fit.

Other Government-Backed Loans

In addition to the standard FHA 203(k) program, there is a limited FHA 203(k) loan of up to $35,000. Homebuyers and homeowners can use the funding to repair or upgrade a home.

Then there are FHA Title 1 loans for improvements that “substantially protect or improve the basic livability or utility of the property.” The fixed-rate loans may be used in tandem with a 203(k) rehabilitation mortgage.

The owner of a single-family home can apply to borrow up to $25,000 with a secured Title 1 loan.

With Fannie Mae’s HomeStyle® Renovation Mortgage, homebuyers and homeowners can combine their home purchase or refinance with renovation funding in a single mortgage. There’s also a Freddie Mac renovation mortgage, but standard credit score guidelines apply.

Cash-Out Refinance

If you have an existing mortgage and equity in the home, and want to take out a loan for home improvements, a cash-out refinance from a private lender may be worth looking into.

You usually must have at least 20% equity in your home to be eligible, meaning a maximum 80% loan-to-value (LTV) ratio of the home’s current value. (To calculate LTV, divide your mortgage balance by the home’s appraised value. Let’s say your mortgage balance is $225,000 and the home’s appraised value is $350,000. Your LTV is 64%, which indicates 36% equity in the home.)

A cash-out refi could also be an opportunity to improve your mortgage interest rate and change the length of the loan.

PACE Loan

For green improvements to your home, such as solar panels or an energy-efficient heating system, you might be eligible for a PACE loan .

The nonprofit organization PACENation promotes property-assessed clean energy (or PACE) financing for homeowners and commercial property owners, to be repaid over a period of up to 30 years.

Home Improvement Loan

A home improvement loan is an unsecured personal loan—meaning the house isn’t used as collateral to secure the loan. Approval is based on personal financial factors that will vary from lender to lender.

Lenders offer a wide range of loan sizes, so you can invest in minor updates to major renovations.

Home Equity Line of Credit

If you need a loan only for repairs but don’t have great credit, a HELOC may provide a lower rate. Be aware that if you can’t make payments on the borrowed funding, which is secured by your home, the lender can seize your home.

The Takeaway

If you have your eye on a fixer-upper that you just know can be polished into a jewel, an FHA 203(k) loan could be the ticket, but options may make more sense to other homebuyers and homeowners.

SoFi offers cash-out refinancing, turning your home equity into renovation money.

Or maybe a home improvement loan of $5,000 to $100,000 seems like a better way to turn your home into a haven.

Check your rate today.



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SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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Source: sofi.com

30-Year Fixed Mortgage Rate Hovers Above All-Time Low

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Abstract illustration of houses and charts

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Mortgage rates fall despite strong economic data reports.

“Mortgage rates fell again this week, continuing the downward trend they’ve exhibited for most of April,” said Zillow Economist Matthew Speakman. “In what was a relatively unremarkable week for mortgage rates, the modest movement was partially driven by discussions about a proposed increase in capital gains tax rates – which placed downward pressure on bond yields and thus rates – and anticipation of a key announcement by the Federal Reserve. Fed Chair Jerome Powell reiterated on Wednesday that the Central Bank has no immediate plans to increase interest rates or curb the purchases of mortgage-backed securities – a position that placed more downward pressure on bond yields and is likely to result in more mortgage decreases in the coming days. Looking ahead, with a slew of key economic reports on the horizon – including consumer spending and inflation data – the relatively muted mortgage rate activity from the past couple weeks may transition to more significant movements.”

Additionally, the 15-year fixed mortgage rate was 2.11%, and for 5/1 ARMs, the rate was 2.55%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.8% 2.85% 0.08%
20-Year Fixed 2.66% 2.73% 0.03%
15-Year Fixed 2.1% 2.19% 0.02%
10-Year Fixed 2.01% 2.15% -0.08%
7/1 ARM 2.28% 2.96% 0.22%
5/1 ARM 2.34% 3.1% 0.15%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.8% APR with a $75,000 down payment will have a monthly payment of $1,232. A 20-Year Fixed loan of $300,000 at 2.66% APR with a $75,000 down payment will have a monthly payment of $1,613. A 15-Year Fixed loan of $300,000 at 2.1% APR with a $75,000 down payment will have a monthly payment of $1,944. A 10-Year Fixed loan of $300,000 at 2.01% APR with a $75,000 down payment will have a monthly payment of $2,762. A 7/1 ARM loan of $300,000 at 2.28% APR with a $75,000 down payment will have a monthly payment of $1,151. A 5/1 ARM loan of $300,000 at 2.34% APR with a $75,000 down payment will have a monthly payment of $1,159. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.33% 2.99% 0.24%
30-Year Fixed VA 2.54% 2.81% 0.05%
15-Year Fixed FHA 2.11% 2.85% 0.17%
15-Year Fixed VA 2.53% 3.02% 0.04%
5/1 ARM FHA 2.6% 2.97% 0.02%
5/1 ARM VA 3.06% 2.75% -0.19%

A 30-Year Fixed FHA loan of $300,000 at 2.33% APR with a $75,000 down payment will have a monthly payment of $1,159. A 30-Year Fixed VA loan of $300,000 at 2.54% APR with a $75,000 down payment will have a monthly payment of $1,191. A 15-Year Fixed FHA loan of $300,000 at 2.11% APR with a $75,000 down payment will have a monthly payment of $1,946. A 15-Year Fixed VA loan of $300,000 at 2.53% APR with a $75,000 down payment will have a monthly payment of $2,004. A 5/1 ARM FHA loan of $300,000 at 2.6% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.06% APR with a $75,000 down payment will have a monthly payment of $1,273. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.22% 3.27% 0.07%
20-Year Fixed Jumbo 3.29% 3.33% 0.24%
15-Year Fixed Jumbo 2.86% 2.94% 0.06%
10-Year Fixed Jumbo 2.52% 2.6% 0.1%
7/1 ARM Jumbo 2.68% 3.07% -0.25%
5/1 ARM Jumbo 2.61% 3.06% -0.09%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.22% APR with a $150,000 down payment will have a monthly payment of $2,602. A 20-Year Fixed Jumbo loan of $600,000 at 3.29% APR with a $150,000 down payment will have a monthly payment of $3,414. A 15-Year Fixed Jumbo loan of $600,000 at 2.86% APR with a $150,000 down payment will have a monthly payment of $4,102. A 10-Year Fixed Jumbo loan of $600,000 at 2.52% APR with a $150,000 down payment will have a monthly payment of $5,660. A 7/1 ARM Jumbo loan of $600,000 at 2.68% APR with a $150,000 down payment will have a monthly payment of $2,427. A 5/1 ARM Jumbo loan of $600,000 at 2.61% APR with a $150,000 down payment will have a monthly payment of $2,406. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

30-Year Fixed Mortgage Rate Rises

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Abstract illustration of houses and charts

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Mortgage rates fall despite strong economic data reports.

“Mortgage rates fell again this week, continuing the downward trend they’ve exhibited for most of April,” said Zillow Economist Matthew Speakman. “In what was a relatively unremarkable week for mortgage rates, the modest movement was partially driven by discussions about a proposed increase in capital gains tax rates – which placed downward pressure on bond yields and thus rates – and anticipation of a key announcement by the Federal Reserve. Fed Chair Jerome Powell reiterated on Wednesday that the Central Bank has no immediate plans to increase interest rates or curb the purchases of mortgage-backed securities – a position that placed more downward pressure on bond yields and is likely to result in more mortgage decreases in the coming days. Looking ahead, with a slew of key economic reports on the horizon – including consumer spending and inflation data – the relatively muted mortgage rate activity from the past couple weeks may transition to more significant movements.”

Additionally, the 15-year fixed mortgage rate was 2.11%, and for 5/1 ARMs, the rate was 2.55%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.8% 2.85% 0.08%
20-Year Fixed 2.66% 2.73% 0.03%
15-Year Fixed 2.1% 2.19% 0.02%
10-Year Fixed 2.01% 2.15% -0.08%
7/1 ARM 2.28% 2.96% 0.22%
5/1 ARM 2.34% 3.1% 0.15%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.8% APR with a $75,000 down payment will have a monthly payment of $1,232. A 20-Year Fixed loan of $300,000 at 2.66% APR with a $75,000 down payment will have a monthly payment of $1,613. A 15-Year Fixed loan of $300,000 at 2.1% APR with a $75,000 down payment will have a monthly payment of $1,944. A 10-Year Fixed loan of $300,000 at 2.01% APR with a $75,000 down payment will have a monthly payment of $2,762. A 7/1 ARM loan of $300,000 at 2.28% APR with a $75,000 down payment will have a monthly payment of $1,151. A 5/1 ARM loan of $300,000 at 2.34% APR with a $75,000 down payment will have a monthly payment of $1,159. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.33% 2.99% 0.24%
30-Year Fixed VA 2.54% 2.81% 0.05%
15-Year Fixed FHA 2.11% 2.85% 0.17%
15-Year Fixed VA 2.53% 3.02% 0.04%
5/1 ARM FHA 2.6% 2.97% 0.02%
5/1 ARM VA 3.06% 2.75% -0.19%

A 30-Year Fixed FHA loan of $300,000 at 2.33% APR with a $75,000 down payment will have a monthly payment of $1,159. A 30-Year Fixed VA loan of $300,000 at 2.54% APR with a $75,000 down payment will have a monthly payment of $1,191. A 15-Year Fixed FHA loan of $300,000 at 2.11% APR with a $75,000 down payment will have a monthly payment of $1,946. A 15-Year Fixed VA loan of $300,000 at 2.53% APR with a $75,000 down payment will have a monthly payment of $2,004. A 5/1 ARM FHA loan of $300,000 at 2.6% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.06% APR with a $75,000 down payment will have a monthly payment of $1,273. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.22% 3.27% 0.07%
20-Year Fixed Jumbo 3.29% 3.33% 0.24%
15-Year Fixed Jumbo 2.86% 2.94% 0.06%
10-Year Fixed Jumbo 2.52% 2.6% 0.1%
7/1 ARM Jumbo 2.68% 3.07% -0.25%
5/1 ARM Jumbo 2.61% 3.06% -0.09%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.22% APR with a $150,000 down payment will have a monthly payment of $2,602. A 20-Year Fixed Jumbo loan of $600,000 at 3.29% APR with a $150,000 down payment will have a monthly payment of $3,414. A 15-Year Fixed Jumbo loan of $600,000 at 2.86% APR with a $150,000 down payment will have a monthly payment of $4,102. A 10-Year Fixed Jumbo loan of $600,000 at 2.52% APR with a $150,000 down payment will have a monthly payment of $5,660. A 7/1 ARM Jumbo loan of $600,000 at 2.68% APR with a $150,000 down payment will have a monthly payment of $2,427. A 5/1 ARM Jumbo loan of $600,000 at 2.61% APR with a $150,000 down payment will have a monthly payment of $2,406. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

30-Year Fixed Mortgage Rate Falls to New Record Low

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Abstract illustration of houses and charts

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Mortgage rates fall despite strong economic data reports.

“Mortgage rates fell again this week, continuing the downward trend they’ve exhibited for most of April,” said Zillow Economist Matthew Speakman. “In what was a relatively unremarkable week for mortgage rates, the modest movement was partially driven by discussions about a proposed increase in capital gains tax rates – which placed downward pressure on bond yields and thus rates – and anticipation of a key announcement by the Federal Reserve. Fed Chair Jerome Powell reiterated on Wednesday that the Central Bank has no immediate plans to increase interest rates or curb the purchases of mortgage-backed securities – a position that placed more downward pressure on bond yields and is likely to result in more mortgage decreases in the coming days. Looking ahead, with a slew of key economic reports on the horizon – including consumer spending and inflation data – the relatively muted mortgage rate activity from the past couple weeks may transition to more significant movements.”

Additionally, the 15-year fixed mortgage rate was 2.11%, and for 5/1 ARMs, the rate was 2.55%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.84% 2.9% -0.05%
20-Year Fixed 2.72% 2.79% -0.04%
15-Year Fixed 2.13% 2.21% -0.03%
10-Year Fixed 2.02% 2.14% -0.12%
7/1 ARM 2.65% 3.25% -0.1%
5/1 ARM 2.49% 3.19% 0.02%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.84% APR with a $75,000 down payment will have a monthly payment of $1,239. A 20-Year Fixed loan of $300,000 at 2.72% APR with a $75,000 down payment will have a monthly payment of $1,621. A 15-Year Fixed loan of $300,000 at 2.13% APR with a $75,000 down payment will have a monthly payment of $1,948. A 10-Year Fixed loan of $300,000 at 2.02% APR with a $75,000 down payment will have a monthly payment of $2,762. A 7/1 ARM loan of $300,000 at 2.65% APR with a $75,000 down payment will have a monthly payment of $1,208. A 5/1 ARM loan of $300,000 at 2.49% APR with a $75,000 down payment will have a monthly payment of $1,183. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.33% 2.99% 0.53%
30-Year Fixed VA 2.6% 2.89% -0.21%
15-Year Fixed FHA 2.06% 2.84% -0.06%
15-Year Fixed VA 2.62% 3.13% 0%
5/1 ARM FHA 2.69% 3% -0.14%
5/1 ARM VA 2.35% 2.45% 0.09%

A 30-Year Fixed FHA loan of $300,000 at 2.33% APR with a $75,000 down payment will have a monthly payment of $1,158. A 30-Year Fixed VA loan of $300,000 at 2.6% APR with a $75,000 down payment will have a monthly payment of $1,200. A 15-Year Fixed FHA loan of $300,000 at 2.06% APR with a $75,000 down payment will have a monthly payment of $1,939. A 15-Year Fixed VA loan of $300,000 at 2.62% APR with a $75,000 down payment will have a monthly payment of $2,017. A 5/1 ARM FHA loan of $300,000 at 2.69% APR with a $75,000 down payment will have a monthly payment of $1,214. A 5/1 ARM VA loan of $300,000 at 2.35% APR with a $75,000 down payment will have a monthly payment of $1,162. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.27% 3.32% -0.03%
20-Year Fixed Jumbo 3.71% 3.76% -0.3%
15-Year Fixed Jumbo 2.86% 2.94% -0.06%
10-Year Fixed Jumbo 2.63% 2.7% 0%
7/1 ARM Jumbo 2.59% 2.81% 0.04%
5/1 ARM Jumbo 2.39% 2.73% 0.19%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.27% APR with a $150,000 down payment will have a monthly payment of $2,618. A 20-Year Fixed Jumbo loan of $600,000 at 3.71% APR with a $150,000 down payment will have a monthly payment of $3,545. A 15-Year Fixed Jumbo loan of $600,000 at 2.86% APR with a $150,000 down payment will have a monthly payment of $4,101. A 10-Year Fixed Jumbo loan of $600,000 at 2.63% APR with a $150,000 down payment will have a monthly payment of $5,690. A 7/1 ARM Jumbo loan of $600,000 at 2.59% APR with a $150,000 down payment will have a monthly payment of $2,400. A 5/1 ARM Jumbo loan of $600,000 at 2.39% APR with a $150,000 down payment will have a monthly payment of $2,336. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

Pros & Cons of Refinancing Your Home Mortgage Loan

If you purchased your home when the federal funds rate was at least 150 basis points — 1.5% — higher than today, an opportunity to profit from low interest rates is staring you in the face. In fact, there’s a good chance it’s surrounding you as you read these words.

Like millions of other homeowners paying more than necessary each month, you can take advantage of current low interest rates by refinancing your mortgage loan.

Knowing whether you should refinance your mortgage is trickier. Before you can decide, you need to know more about its upsides and downsides, including the potentially negative consequences for your personal finances and housing security.

Pro tip: If you decide that refinancing is the best option for you, Credible* will allow you to compare prequalified rates from multiple lenders in just minutes.

Advantages of Refinancing Your Mortgage Loan

Refinancing your mortgage loan could give you a financial boost by reducing your overall borrowing costs or creating low-cost financial leverage for home improvement projects and other financial goals. Many refinancing applicants realize more than one of these benefits.

1. It Could Reduce Your Lifetime Interest Costs

Reducing lifetime interest costs — and your total borrowing costs along with them — is among the most compelling reasons to refinance a mortgage. Many homeowners refinance with this objective in mind. They want to save money, and who can blame them?

Depending on the structure, type, term, and rate of your original loan, refinancing your mortgage could reduce your total interest expense in one or more ways:

  • Lowering the Interest Rate. Getting a lower interest rate is much more likely to occur if rates have fallen since your original loan’s issue and critical elements of your borrower profile — such as your credit score, income, and debt-to-income ratio — remain constant or improve.
  • Shortening the Term. A shorter term means less time for interest to accrue. The downside is the potential for a higher monthly payment.
  • Converting From Adjustable Rate to Fixed Rate. Refinancing your adjustable-rate mortgage loan into a fixed-rate mortgage loan eliminates the risk your interest rate will spike if prevailing rates rise.
  • Converting From Jumbo to Conventional. Jumbo loans generally carry higher interest rates than conforming (conventional) loans. Once your remaining balance drops below the conforming loan limit (about $485,000 in most markets), refinancing could reduce your lifetime borrowing costs.

2. It Could Lower Your Monthly Payments

Simply refinancing a higher-rate loan into a lower-rate loan with an equivalent term is likely to lower your monthly payments.

If a lower rate isn’t in the cards, a less desirable alternative is to refinance into a longer-term loan and spread your payments over a longer timeframe. The downside of this move is a higher lifetime borrowing cost.

3. It Could Increase Your Loan’s Predictability

Predictability isn’t a concern if your original loan has a fixed rate. You experience year-to-year variation on the escrow side, as your property taxes and insurance fluctuate. But your principal and interest payment remain fixed for the life of the loan.

But if your original loan has an adjustable rate, predictability is a problem, and refinancing to a fixed-rate loan is a reasonable solution. If your new fixed-rate loan prevents a costly upward rate adjustment, all the better.

4. It Could Eliminate Mortgage Insurance

The FHA mortgage loan program has helped millions of first-time homebuyers afford places of their own. Maybe you’re among them.

If so, you know that your FHA loan carries a hefty cost: high annual mortgage insurance premiums that remain in force for at least 11 years from the issue date (on loans issued after June 2013) — and permanently, in some cases.

Refinancing your FHA loan into a conventional loan could eliminate its annual mortgage insurance premium years ahead of schedule. You need only wait to accumulate 20% equity in your home, which should happen much sooner than 11 years (and certainly sooner than 15 or 30 years) after your original loan’s issue.

And as long as you have at least 20% equity when you refinance, you’ll avoid private mortgage insurance (PMI) as well.

5. It’s a Low-Cost Way to Tap the Equity in Your Home

If you plan to refinance anyway to take advantage of low interest rates, a cash-out refinance loan is a fine alternative to a home equity loan or line of credit.

Like those home equity products, a cash-out refinance loan is secured by the home’s value itself, reducing risk for the lender and facilitating rates far lower than credit cards and unsecured personal loans.

You can use this low-cost capital for basically anything, including:

  • Consolidating higher-interest debt
  • Financing major home improvements or repairs
  • Paying your kids’ college bills
  • Paying off your student loans
  • Settling medical bills and other major expenses

Disadvantages of Refinancing Your Mortgage Loan

Refinancing your mortgage is not a risk- or hassle-free endeavor.

Potential drawbacks include an arduous application process, no guarantee of approval or cost savings, the potential for a higher monthly payment, and the risk — heightened in down markets — that the required lender appraisal could actually backfire.

1. The Application Process Is a Pain

Applying to refinance your mortgage isn’t quite as involved or time-consuming as applying for a purchase loan. But it’s not a walk in the park or something to do on a whim.

As you did before your purchase loan, you must provide reams of documentation verifying your employment, income, and identity. And the deal won’t be done until you close, leaving you on pins and needles for weeks. Don’t go through with it unless you’re serious about refinancing.

2. Approval Is Not Guaranteed

The fact that you own your home doesn’t entitle you to refinance its mortgage.

If your borrower profile has deteriorated due to a drop in your credit score or income, a recent job change, or a higher debt-to-income ratio, your application could be denied outright or accepted on less favorable terms than expected.

3. You’re Not Guaranteed to Break Even

Most refinancing applicants expect their new mortgage loans to cost less than their original loans.

But there are plenty of scenarios in which that doesn’t pan out — and not just because the borrower intentionally refinances into a longer term (going from a 15-year to a 30-year mortgage, for example) or can’t find a lower rate.

If fate intervenes and you must sell your house before you break even on your refinance loan, you’ll never recoup your loan’s upfront costs.

And because all refinance loans have closing costs that push breakeven time into the future, you’ll have to wait some time — usually several years — before you sell.

4. Your Monthly Payment Could Increase

If your objective is to cash out some of your home’s equity or shorten your loan term, your monthly payment will probably increase. Nevertheless, the jump might come as a shock and can put a severe strain on your monthly budget over time.

Before taking out a loan that costs more than your current mortgage payment, be as sure as you can that it will remain affordable.

5. It Could Backfire in a Down Market

If home values in your area have declined since you purchased or last ordered a professional appraisal on your home, you run the risk of a lowball appraisal that squelches your chance of qualifying for a refinance loan anytime soon.

This outcome is likelier in areas with high (or increasing) rates of foreclosures and short sales. If you suspect an appraisal would do more harm than good and don’t urgently need to refinance, wait until the market improves.


Final Word

Refinancing a mortgage is not something to be done on a whim. Even when interest rates are low and your borrower profile is strong, the undertaking is no sure thing.

A forced relocation could compel you to sell your house years before you planned, wiping out most of your loan’s expected savings and causing you to lose money on the deal.

An unexpected job loss could threaten your family’s financial stability and put you at risk of losing your home.

A market downturn could leave you with less equity than you expected, putting your home improvement plans on hold.

Then again, you could see your refinance application approved without a hitch, reap thousands upon thousands of dollars in savings after closing costs through a lower monthly mortgage payment, and avoid the downsides of the unconventional loan that had outlived its purpose the day you first closed on your home.

There’s simply no way to predict what will happen. But as is always the case when the stakes are high, fortune favors those who know what could go wrong — and what could go right.

*Advertisement from Credible Operations, Inc. NMLS 1681276.Address: 320 Blackwell St. Ste 200, Durham, NC, 27701

Source: moneycrashers.com

What to know about FICO’s new credit scoring system

A woman looks at her credit card.

Disclosure regarding Lexington Law’s editorial content.

The Fair Isaac Corporation (FICO) has announced it will be updating its credit scoring system this summer when they roll out the FICO Score 10 and 10T, which together represent the biggest change to the FICO system since 2014. 

The new system is designed to help identify high-risk borrowers by incorporating people’s history of credit behavior, paying special attention to those who use personal loans to consolidate debt but do not pay that debt down. FICO has estimated that about 110 million users will see a change in their credit score under the new FICO 10 and FICO 10T systems.

Here we’ve broken down how the new system works, what effect you can expect it to have on your score and what to do differently under the new system.

What’s Different About the New Credit Scoring System?

The new FICO scoring system allows lenders to incorporate “trended data” that shows how responsibly a borrower behaves with regard to credit. It also adjusts how important certain information is when calculating your score.

Factors weighed more heavily in the new FICO scoring model include:

  • Personal loans, especially those used to consolidate credit card debt
  • Delinquencies, especially those in the past two years
  • Credit utilization ratio
What's different about the FICO 10/10T? They weigh personal loans, history of delinquencies, and credit utilization ratio more heavily.

Will My Credit Score Change?

Though millions are likely to see their scores change as a result of the switch to the FICO 10, not all of these changes will be significant, and some users could even see their scores receive a boost. FICO representatives estimate that about 40 million—with already high credit scores—could see their credit scores increase by a small amount, with another 40 million seeing a decrease in their scores.

Consider these factors and try to predict how your score may change in the switch to the FICO 10.

You’re likely to see a drop if:

  • You’ve had recent delinquencies.
  • You consistently carry a balance on your credit cards.
  • You took out a personal loan to consolidate credit card debt.
  • You’ve maintained a high credit utilization ratio in the past two years.

You’re less likely to see a drop (and your score might even increase) if:

  • You’ve stayed current on your payments in the past two years.
  • You’ve maintained a healthy credit utilization ratio in the past two years.
  • You only put high balances on your credit cards occasionally and pay those balances down quickly.

Note: The FICO 10 will become available in the summer, but that doesn’t mean lenders will start using it right away. Many lenders still use FICO 8 or FICO 9.

What Can a 20-Point Difference Make?

According to FICO, most users whose credit scores change with the new system will see a difference of around 20 points. While that may not seem like much, a 20-point difference can be significant.

Here are three ways a 20-point drop in credit score can impact you:

1. Higher Loan Interest

Depending on where your score started, a 20-point drop can cost you significantly when it comes to taking out a home mortgage or auto loan. For example: On a 30-year fixed rate mortgage of $200,000, someone with a 660 credit score will pay about $18,000 less in interest than someone with a 640.

2. Higher Premiums on Insurance

Credit is also one of the factors that determines the amount you must pay in insurance premiums, and a 20-point difference can be significant there as well. According to insurance comparison site The Zebra, the average difference in annual premiums from “very good” (740 – 799) to “great” (800 – 850) credit is $116.

3. Weaker Loan Applications

If your credit was already on the low side, a 20-point drop may do more than increase your interest and premiums—it can actually disqualify you for a number of applications. For instance, most low-interest mortgage programs (like FHA, VA and USDA) have strict minimum credit score requirements.

Minimum credit scores for various loan programs: 500–579 for an FHA loan at 10% down, 580 for an FHA loan at 3.5% down, 620 for a VA loan, 640 for a USDA loan, and 680–720 for a jumbo loan.

How Can I Keep My New Credit Score Up?

Best practices for keeping your credit score healthy will remain unchanged even after FICO rolls out its new system. However, certain tactics will be more powerful than others using the new FICO calculations.

Here are three key tactics for maximizing your new FICO score:

1. Keep Detailed Financial Records

The new credit scoring system weighs the last two years of debt balances, so it’s important to have accurate records on all of your lines of credit going back at least that far. Keeping pristine records of your debts is the first step to identifying and solving any problems or discrepancies. 

2. Pay Credit Balances Early in the Month

Even though it amounts to the same as paying your bill once a month, paying your credit balance twice a month or even once a week can improve your credit score. By preventing your credit balance from ever getting too high throughout the month, you lower your credit utilization score, which is weighed heavily under the new system.

3. Sign Up for Boosted Credit Services

Alternative credit models like UltraFICO and Experian Boost raise users’ credit scores by incorporating “extra” data, like utility bills and rent payments. If you’re not enrolled in one of these services and you’re concerned about your score taking a plunge following the FICO 10 rollout, signing up could offset any negative impact caused by the new model.

Bottom Line: Good Financial Habits Are Always a Good Idea

When it comes down to it, good credit habits are essential, and none of the changes being made as part of the FICO scoring update are revolutionary. The same positive financial behavior that resulted in a great score with the old system will prove successful using the FICO 10 as well. 

However, those who stand to be most impacted by a 20-point change in their score—like anyone whose score is currently on the cusp of two different credit categories—may want to use this information to strategize how best to protect their score from changes. There are a number of ways to work on improving your credit health that range from simple tweaks to long-term changes to your financial habits. It’s always a good time to start prioritizing your financial well-being!


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

What to know about FICO’s new credit scoring system – Lexington Law

A woman looks at her credit card.

Disclosure regarding Lexington Law’s editorial content.

The Fair Isaac Corporation (FICO) has announced it will be updating its credit scoring system this summer when they roll out the FICO Score 10 and 10T, which together represent the biggest change to the FICO system since 2014. 

The new system is designed to help identify high-risk borrowers by incorporating people’s history of credit behavior, paying special attention to those who use personal loans to consolidate debt but do not pay that debt down. FICO has estimated that about 110 million users will see a change in their credit score under the new FICO 10 and FICO 10T systems.

Here we’ve broken down how the new system works, what effect you can expect it to have on your score and what to do differently under the new system.

What’s Different About the New Credit Scoring System?

The new FICO scoring system allows lenders to incorporate “trended data” that shows how responsibly a borrower behaves with regard to credit. It also adjusts how important certain information is when calculating your score.

Factors weighed more heavily in the new FICO scoring model include:

  • Personal loans, especially those used to consolidate credit card debt
  • Delinquencies, especially those in the past two years
  • Credit utilization ratio
What's different about the FICO 10/10T? They weigh personal loans, history of delinquencies, and credit utilization ratio more heavily.

Will My Credit Score Change?

Though millions are likely to see their scores change as a result of the switch to the FICO 10, not all of these changes will be significant, and some users could even see their scores receive a boost. FICO representatives estimate that about 40 million—with already high credit scores—could see their credit scores increase by a small amount, with another 40 million seeing a decrease in their scores.

Consider these factors and try to predict how your score may change in the switch to the FICO 10.

You’re likely to see a drop if:

  • You’ve had recent delinquencies.
  • You consistently carry a balance on your credit cards.
  • You took out a personal loan to consolidate credit card debt.
  • You’ve maintained a high credit utilization ratio in the past two years.

You’re less likely to see a drop (and your score might even increase) if:

  • You’ve stayed current on your payments in the past two years.
  • You’ve maintained a healthy credit utilization ratio in the past two years.
  • You only put high balances on your credit cards occasionally and pay those balances down quickly.

Note: The FICO 10 will become available in the summer, but that doesn’t mean lenders will start using it right away. Many lenders still use FICO 8 or FICO 9.

What Can a 20-Point Difference Make?

According to FICO, most users whose credit scores change with the new system will see a difference of around 20 points. While that may not seem like much, a 20-point difference can be significant.

Here are three ways a 20-point drop in credit score can impact you:

1. Higher Loan Interest

Depending on where your score started, a 20-point drop can cost you significantly when it comes to taking out a home mortgage or auto loan. For example: On a 30-year fixed rate mortgage of $200,000, someone with a 660 credit score will pay about $18,000 less in interest than someone with a 640.

2. Higher Premiums on Insurance

Credit is also one of the factors that determines the amount you must pay in insurance premiums, and a 20-point difference can be significant there as well. According to insurance comparison site The Zebra, the average difference in annual premiums from “very good” (740 – 799) to “great” (800 – 850) credit is $116.

3. Weaker Loan Applications

If your credit was already on the low side, a 20-point drop may do more than increase your interest and premiums—it can actually disqualify you for a number of applications. For instance, most low-interest mortgage programs (like FHA, VA and USDA) have strict minimum credit score requirements.

Minimum credit scores for various loan programs: 500–579 for an FHA loan at 10% down, 580 for an FHA loan at 3.5% down, 620 for a VA loan, 640 for a USDA loan, and 680–720 for a jumbo loan.

How Can I Keep My New Credit Score Up?

Best practices for keeping your credit score healthy will remain unchanged even after FICO rolls out its new system. However, certain tactics will be more powerful than others using the new FICO calculations.

Here are three key tactics for maximizing your new FICO score:

1. Keep Detailed Financial Records

The new credit scoring system weighs the last two years of debt balances, so it’s important to have accurate records on all of your lines of credit going back at least that far. Keeping pristine records of your debts is the first step to identifying and solving any problems or discrepancies. 

2. Pay Credit Balances Early in the Month

Even though it amounts to the same as paying your bill once a month, paying your credit balance twice a month or even once a week can improve your credit score. By preventing your credit balance from ever getting too high throughout the month, you lower your credit utilization score, which is weighed heavily under the new system.

3. Sign Up for Boosted Credit Services

Alternative credit models like UltraFICO and Experian Boost raise users’ credit scores by incorporating “extra” data, like utility bills and rent payments. If you’re not enrolled in one of these services and you’re concerned about your score taking a plunge following the FICO 10 rollout, signing up could offset any negative impact caused by the new model.

Bottom Line: Good Financial Habits Are Always a Good Idea

When it comes down to it, good credit habits are essential, and none of the changes being made as part of the FICO scoring update are revolutionary. The same positive financial behavior that resulted in a great score with the old system will prove successful using the FICO 10 as well. 

However, those who stand to be most impacted by a 20-point change in their score—like anyone whose score is currently on the cusp of two different credit categories—may want to use this information to strategize how best to protect their score from changes. There are a number of ways to work on improving your credit health that range from simple tweaks to long-term changes to your financial habits. It’s always a good time to start prioritizing your financial well-being!


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

What is PMI and How Can I Get Rid of It? – Lexington Law

private mortgage insurance
For prospective homeowners, there are many things to learn before you even begin the process of searching for a home, especially for first time buyers. One of the most important lessons to learn for those who have less than 20 percent to put down on their home is that of private mortgage insurance (PMI).

What is PMI?

PMI is a type of insurance your lender solicits from you in the event that you buy a home without a 20 percent down payment. It usually ends up affecting Federal Housing Administration (FHA) loan applicants, because these applicants are only required to put down 3.5 percent of their total purchase price.

For any buyer who was unable to put down a full 20 percent, you should expect mortgage insurance premiums of roughly .05-1.00 percent of your total loan amount per year. There are several factors that affect the cost of your PMI:

  • Down payment size – The larger your down payment, the lower your PMI premium.
  • Credit score – Higher credit scores earn a lower PMI rate.
  • Loan appreciation potential – If your home is expected to appreciate in value rather than depreciate, your PMI will be lower.
  • Borrower occupancy – If you plan to rent your new home rather that occupy it yourself, expect to pay higher PMI premiums.
  • Loan type – The greater the risk to your lender, the higher your PMI will be. Anyone applying for a loan with a low credit score (500-650) and the minimum down payment might expect to have a higher PMI premium.

Why do I need PMI?

You may be wondering: why would anyone elect to get PMI? The short answer is they would not.

PMI is not the same as car insurance or homeowners insurance. The aforementioned types of insurance are designed to protect consumers in the event of catastrophe, such as a house fire or car accident. PMI, on the other hand, only protects your lender in the even of loan default. Not only will they take over possession of your home, but they will have the additional money you paid into your PMI policy.

How do I get rid of it?

If you are like many FHA loan applicants, there might not be much you can do about avoiding PMI altogether, but you can keep a close eye on your loan balance and request to remove it as soon as possible. Lenders are required by law to remove PMI automatically when you have paid enough to have 22 percent equity in your home. However, when you reach 20 percent, you can call your lender and request to have it removed, and they are required to comply with your request.

There are a few other ways to remove PMI:

  • Refinance your home
  • Get a new appraisal
  • Pay extra on your loan (any extra amount will be applied directly toward your principal loan amount)
  • Consider making additions to your home, which may increase its value.

Ultimately, you should try to remove PMI as soon as you possibly can. It does not benefit you as a homeowner, and you can save thousands of dollars over the life of your loan if you have it removed. For more information on how to improve your finances, including credit repair after buying a home, contact the experts at Lexington Law at 1-833-333-2281 .

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Source: lexingtonlaw.com

FHA Refinance Applications Plummet in November

Last updated on November 30th, 2011

down

FHA refinance loan volume fell 29.9 percent from October to November, according to a FHA Single-Family Outlook released recently by HUD.

A total of 69,062 FHA loan applications were received for refinance purposes, down from 98,544 a month prior, and well below the 112,095 seen the same time last year.

It looks to be another sign that the refinance boom is quickly running out of steam, despite mortgage rates remaining relatively close to historic lows.

The popular 30-year fixed mortgage actually hit its lowest point during the week ending November 11, at a staggering 4.17 percent, but many homeowners probably already took advantage of the low rates beforehand.

Meanwhile, purchase money mortgage applications totaled 63,920, down 6.9 percent from October and 26.6 percent from the 87,142 seen a year earlier.

Reverse mortgages were down just 0.4 percent month-to-month to 8,217, but up a whopping 25 percent from the 6,571 applications seen in November 2009.

Perhaps the recent warning from Consumer Reports will, ahem, reverse that trend.

FHA endorsed a total of 131,258 mortgages for $26.1 billion in November, and as of the end of the month, had 6,745,827 cases in-force with an unpaid balance of $921 billion.

During the month, there were 588,947 FHA loans in serious default (90 days + delinquent).

The default rate jumped to 8.7 percent from 8.0 percent a month earlier, though it was attributed to a reporting problem with some smaller mortgage lenders.

And it’s still 0.6 percent lower than the 9.3 percent default rate seen a year ago.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

FHA Short Refinance Option Coming Soon

short

A new option that should be available by fall of this year will allow borrowers current on their mortgages to execute short refinances into FHA loans, assuming the original loan is not FHA-insured.

In fact, the new loan must NOT be owned or guaranteed by the FHA, VA, or the USDA. So essentially only those with conventional loans need apply.

Loans eligible for refinancing via the FHA short refinance program include Alt-A loans, subprime loans, fixed-rate loans, ARMs, and loans of all documentation types.

The new FHA loan must have a balance no greater than 97.75 percent of the value of the home, and the total loan-to-value (including any second mortgages) cannot exceed 115 percent after the refinancing.

At the same time, the minimum write-down by the mortgage lender must be 10 percent of the unpaid balance of the original loan.

For manually underwritten loans, the total monthly payment, including any second mortgages, must not be greater than 31/50 or 35/48 debt-to-income, though the borrower should benefit from both a reduced balance and a reduced interest rate thanks to the current low-rate environment.

Borrowers who choose the FHA short refinance option can go with a fixed-rate mortgage or an ARM.

Homeowner eligibility for the FHA short refinance program is as follows:

– Homeowners must be current on existing mortgage payment (unless the borrower successfully completes a 3-month trial payment plan)
– Homeowner must occupy the home as a primary residence
– Homeowner must be underwater on existing mortgage(s)
– Homeowner must have a FICO score of at least 500
– Homeowner must meet standard FHA underwriting requirements
– Existing lenders/investors must agree to a principal write-down
– Condos and 1-4 unit properties are eligible
– Not eligible if convicted of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage/real estate transaction within last 10 years

Borrowers who execute an FHA short refinance should expect to see their credit score negatively impacted as with any other loan forgiveness.

And the standard FHA mortgage insurance premium structure will apply to the new FHA loans.

To increase lender participation, incentives for immediate write-downs of underwater second mortgages will be offered, based on the loan-to-value.

To fund the program, up to $14 billion in TARP funds will be used – FHA will publish data on the number of short refinance loans, the average percentage written down, and the quantity of principal reduced quarterly.

If interested, contact your existing lender/servicer or any FHA-approved lender for more information. The program is expected to be offered until December 31, 2014.

Tip: If you already have an FHA loan, you can refinance an underwater mortgage via the FHA streamline refinance program.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com