Steps to Refinancing an FHA loan

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At Red Blue Realty, we are always ready to suggest ways for home owners to save money.
Refinancing an FHA loan is one such way. This refinancing process is fairly simple. Homeowners interested in refinancing are usually able to reduce their monthly payments because interest rates will be lower. You can also convert a 30-year fixed loan to a fixed rate 15-year loan, which will allow the faster building of home equity in a property. Refinance options also strongly benefit you if you would prefer a conventional fixed rate loan over an adjustable mortgage loan. And, you may also find that refinancing is a convenient way to access and use your home equity. You should know that refinancing of an FHA loan is available only for homeowners who use their home as a primary residence.

Refinancing is a solid option for you if your property has increased in value since you purchased it. This increase in value may be an incentive for you to seek a cash-out option. This option means that you can take out a mortgage for a larger amount than the amount you currently owe on your home. You can then receive the balance of that loan as cash. This type of loan can be valuable for you, particularly in regard to handling large expenses such as a new vehicle, education expenses for your children, or medical bills.

Some options you can choose when refinancing an FHA loan will allow you to refinance by using the FHA’s streamlined refinancing program. This program gives you the ability to move quickly through the lending process and reduce your interest rate, often without any appraisal. The FHA Streamline Refinance can also eliminate or greatly reduce much of your paper work, which saves lenders time and money as well as you.

The FHA began this refinancing in the 1980′s, and while the streamline process won’t completely eliminate fees, it does substantially reduce what documentation is necessary for you to provide as well as the underwriting necessary to complete the loan.

Red Blue Realty’s experts know that to take advantage of the streamline refinancing program, you must meet some basic requirements:

- first, your mortgage must be FHA insured
- second, your mortgage must have no delinquent payments outstanding
- third, your refinance must lower your principal and interest payments
- fourth, your refinance converts an adjustable rate mortgage (ARM) to a fixed-rate
- fifth, with streamlining, be aware that you cannot receive the cash-out option

Streamlining an FHA loan may take several different forms for you. In some cases, mortgage lenders provide streamlined refinances that eliminate out of pocket expenses for the borrower, folding in costs and fees into the cost of the loan. And do note that while in many cases an appraisal can be foregone, any properties involving a rental unit will still require an appraisal.

As with any mortgage financing process, whether streamlined or not, when refinancing an FHA loan you’ll of course need to gather and provide certain documents for the lender.

These often include your bank statements, pay stubs or W-2′s; and tax returns if you are self-employed. Your credit report will also be required. You should of course be prepared to discuss any credit blemishes on your credit report, including late pays. Also, your bank statements must be verified. You can make refinancing progress faster by providing your bank statements for the most recent three-month period.

No matter what refinancing option you choose to take advantage of, the benefits of refinancing an FHA loan can be significant for you. To start the process, feel free to give Red Blue Realty a call before you contact your lender.

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