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Pittsfield, MA -- (SBWIRE) -- 03/25/2013 -- Many people have mortgage loans that are insured by the Federal housing Administration (FHA). For those interested, Real-estate-yogi.com has looked into refinancing an FHA mortgage, and here is what it found:
- Qualifications for FHA Refinancing
- Advantages to Refinancing
- End of MIP Payment
Eligibility Requirements for Refinancing
There are lots of qualifications for refinancing an FHA loan, including that an applicant must have been employed by the same employer for a minimum of two years; must be able to make a down payment of 3.5%; and must have a property appraisal done by an FHA-sanctioned appraiser. One’s front-end ratio, which includes the mortgage plus the mortgage insurance home insurance, and taxes, must be less than 31% of one’s income, and one’s back-end ratio, which includes the mortgage and all of one’s debt, must be less than 43% of the gross monthly income.
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There are many advantages to refinancing an FHA mortgage. FHA loans are generally the easiest to qualify for because they have such a low down payment percentage, at 3.5%. One’s credit also does not have to be perfect to meet eligibility requirements. Such a mortgage is assumable, which means that, if the home is sold, the buyer can assume the mortgage loan. Additionally, those who have undergone a bankruptcy, have low or bad credit, or have been foreclosed upon could possibly still qualify for an FHA refinance.
Reasons Not to Refinance
There are a couple of disadvantages to refinancing an FHA mortgage loan. FHA mortgages don’t have the strict standards of conventional lenders so they require two types of mortgage insurance. One of them is the up-front mortgage insurance premium (MIP), which is paid monthly and is 1.75% of the mortgage amount, no matter what a borrower’s credit score is. The other is the annual MIP, which –though called an annual premium – is actually paid monthly as part of the mortgage.
When One Stops Paying MIP
This is important information when refinancing an FHA loan. When an individual is paying for mortgage insurance, when he can stop paying varies. On a loan of more than 15 years, he can cease paying for it when the 5 years have gone by and the mortgage is at 78% of the property value. For loans of 15 years or fewer, one is not required to pay mortgage insurance for the first 5 years. When the LTV (loan to value) rate reaches 78%, he can stop paying.
Real-estate-yogi.com, a reputable website located in Pittsfield, Massachusetts that is always free of charge for its service, connects people who need information about real estate issues with the experts in that field who can provide it. For a no-cost preliminary conference, dial 800-987-1397.