With sub-prime mortgage interest rates rising, many individuals with adjustable rate mortgages (ARMs) face foreclosure. For those who are struggling to keep up with increased monthly payments refinancing may be the only way to keep from losing their homes.
If borrowers use the FHA to refinance from their ARMs to fixed rate mortgages they will be afforded the security of having steady payments for the remainder of their loans.
There will be certain fees associated with a refinance, but for the majority of borrowers with ARMs those costs will be significantly lower than what they would continue to pay if their mortgage is not refinanced. Some of these costs include application fees, origination fees, and appraisal fees.
One specific type of refinance option for those with ARMs is an FHA refinance, which would be easier to qualify for than going through a conventional lender. This is because the federal government insures all FHA loans.
This guarantee considerably reduces the risk to lenders and allows for the more relaxed qualification standards. For these reasons, going through the FHA is an excellent option for those who have less-than-perfect credit and have been unable to keep up with their sub-prime mortgage interest rates.
Currently, FHA loan limits prevent those with large mortgages from refinancing with the FHA. Pending legislation may be changing those rules, allowing for the FHA to help the millions of Americans facing foreclosure.