An FHA loan is a popular type of financing option that is insured through the Federal Housing Administration and offers borrowers who may not ordinarily qualify for a conventional loan an opportunity to own their own home. FHA loans provide a pathway to home financing with their reduced down payment and less restrictive credit requirements. Many homeowners who have FHA loans choose to refinance their mortgages in order to receive better terms and interest rates. If you are located in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and are interested in refinancing your FHA loan, contact Foundation Mortgage. Our loan specialists can help you learn more about FHA refinance options and determine the best option for your situation.
FHA to Conventional Loan Refinance
FHA loans are classified as nonconventional loans, which means that they are insured by the federal government. Conventional loans, on the other hand, are not insured by the government, meaning they pose a greater risk to private lenders if a borrower is unable to pay the loan. Conventional loans have more stringent qualifications than nonconventional loans, but tend to have better rates and terms. Therefore, if a borrower with an FHA loan is able to improve their credit score and prove the ability to make consistent payments, they often choose to refinance their FHA loan in order to obtain a conventional mortgage with a lower interest rate and a better term. Also, while an FHA loan requires borrowers to pay private mortgage insurance, (PMI), throughout the duration of the loan, conventional loans do not require PMI after 20% home equity is obtained.
FHA Cash-Out Refinance
An FHA cash-out refinance allows borrowers to take out a new mortgage that is worth more than what they currently owe on their existing mortgage, and keep the difference of the value as cash. In addition to receiving an additional source of funds in a cash-out refinance, borrowers may also obtain a better rate or term at the same time. Since these loans are of higher value and pose a higher risk to lenders, they typically have stricter eligibility requirements.
FHA Streamline Refinance
An FHA streamline refinance allows borrowers to replace their current FHA loan with a new FHA mortgage that has better rates or terms. An FHA streamline refinance usually requires less documentation, does not require a home appraisal, and has more flexible credit and income requirements than refinancing with a conventional loan. To qualify for an FHA streamline refinance, your existing mortgage must already be an FHA loan, you must have had your current mortgage for at least 210 days and have made at least six mortgage payments, and the refinance must financially benefit the borrower.
Getting Help With an FHA Refinance
If you are interested in learning more about refinancing an FHA loan in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage today for a consultation. We can help find the most suitable refinancing option for your situation.