FHA loans have been in existence since 1934 when they were originally implemented by the Federal Housing Administration in order to enable more people to become homeowners by allowing lenders to offer better deals in the form of low down payments, low closing costs, and easier credit qualification. So while these loans have always been enticing to borrowers, in recent months they’ve become even more so. Cliffco Mortgage Bankers has 3 reasons why you should consider an FHA loan when purchasing or refinancing a home.
- Low mortgage rates
Mortgage rates continue to hover at around 4 percent for a 30-year fixed mortgage. Since some experts predict that rates will rise in the later part of 2016 and into 2017, it could be risky to put off your home purchase or refinance. A rate increase of just .5 percent on a $200,000 loan could end up costing you an additional $700 per year.
- A reduction in FHA mortgage insurance premiums
In order for a borrower to obtain an FHA loan, they must take out mortgage insurance, which consists of two types of fees. The first is an up-front mortgage insurance premium equal to 1.75 percent of the loan amount, and the second is an annual mortgage insurance premium based on a percentage of the outstanding loan balance depending on loan amount, loan term and LTV. Beginning in January 2015, the FHA lowered the annual mortgage insurance premium by .5 percent for most new borrowers – down from 1.35 percent to .85 percent. Again considering a loan of $200,000, that equals a savings of more than $550 annually.
- The FHA Streamline Refinance
If you’ve already purchased a home using an FHA loan, there are still savings to be had. The FHA established a program called the Streamline Refinance for existing FHA borrowers with a good payment history on loans that are at least 210 days old. Under this program, qualifying borrowers can refinance their FHA loan and take advantage of today’s low rates and the new lower annual mortgage insurance premium. Moreover, applicants for the FHA Streamline Refinance do not have to undergo a new credit check or appraisal, and may even be able to apply some of the up-front mortgage insurance premium they paid for loans initiated less than three years ago.
To find out if you qualify to become one of the million+ borrowers who have already reduced their monthly mortgage payments through the FHA Streamline Refinance program, or to obtain information on a new FHA loan, contact your Cliffco Mortgage Bankers representative today at (516) 408-7300