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FHA Mortgage Refinancing Better than Subprime Loans

August 19th, 2011
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The amount of sub-prime loan products being offered these days is drastically decreased from a few years back, before the sub-prime crisis.  Sub-prime mortgages are loans that are made to people who may not be able to maintain the repayment schedule.  They are usually accompanied by higher interest rates and unfavorable terms.  FHA rates are much lower than bad credit mortgage rates and FHA refinancing is available to people with poor credit ratings.  Refinancing with a FHA mortgage provides an opportunity to reduce the monthly mortgage bill, making the repayment schedule easier to maintain.

Sub-prime loan rates mean that the interest can accrue faster than you can pay the loan off.  Refinancing with a FHA mortgage is a great idea because FHA mortgage rates are much lower than sub-prime mortgage rates.  The FHA, or Federal Housing Administration, was founded as a part of the National Housing Act of 1934.  This act was in response to the massive decrease in home ownership and loans during the Great Depression.  The federal government started backing FHA mortgages.  For many years, FHA became a part of the Department of Housing and Urban Development in 1965.  For over thirty years, the agency was completely self-funded, but in 2008, FHA applied to congress for subsidies to stem off the estimated $143,000,000 budget shortfall coming.

Avoid Subprime Refinancing if You Can Qualify for Fixed Rate FHA Mortgage  

The subprime loan crisis had caused a major problem for FHA.  However, FHA rates are much lower than subprime mortgage rates even now.  It stands to reason that refinancing with a FHA is an excellent method of restoring or maintaining credit by avoiding late or skipped mortgage payment.  It is also a good way to avoid either foreclosure or bankruptcy.  To get started in the refinancing process, take a good look at your finances and take care of any problem areas.  Meeting with a financial advisor is a good idea.  There are some great free programs offering financial counseling.

If you have already gotten yourself into a sub-prime loan, you have probably had bad credit at some point.  A financial adviser can help you make a plan for completely correcting your credit that is not skewed by the desire to sell you a mortgage.  They can help you decide if refinancing with a FHA mortgage is the right plan for your particular situation.  FHA Lenders can give you more information on how FHA rates are much lower than sub-prime mortgage rates and what you need to provide to be eligible for government refinancing with the Federal Housing Administration.

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