When considering the advantages of refinancing your FHA mortgage, it’s important to remember that your current interest rates may not be indicative of what you’ll receive when opting for a new loan. If your current lender doesn’t presently offer a fixed-rate refinance program, then look into other lenders who might be able to provide you with better interest rates. You may also consider changing your mortgage company if current interest rates are too high. However, keep in mind that there are disadvantages to refinancing your FHA loan. Here are some of them.
The interest rates you currently pay will determine how much money you will be able to save during the life of your loan. If your interest rates are currently fixed, your future payments will be determined by the interest rates you were already paying. In short, your new home loan will have to be significantly lower than the interest rates you were already paying. For many homeowners, this means refinancing their FHA home loan. The drawback is that most borrowers will pay more money up front when opting for a fixed rate mortgage.
On the flip side, if your current interest rate is higher than your anticipated future payments, a fixed-rate mortgage makes sense. The downside is that the new interest rate will be locked in at a certain rate for the entire life of the loan, unless the lender allows a fluctuation. This means that, for the first several years, your monthly payments may actually be higher than they would be if you had opted for an adjustable-rate mortgage. If you plan on living in your home for the foreseeable future, however, it’s probably in your best interest to stick with your current FHA loan. Over the long run, a fixed-rate mortgage will cost you less money than a new adjustable-rate mortgage would.
One reason that it’s better to stay with your current FHA loan is that adjustable-rate mortgages come with a host of different closing costs. These fees include title, property insurance, and private mortgage insurance. Unless you can prove, beyond doubt, that you’ll be able to make your monthly payment, an FHA loan would be a better option for saving money.
Homeowners who want to refinance their loans are advised to compare loan offers from a variety of lending institutions. Many lenders offer fixed-rate mortgages and some also offer flexible adjustable-rate mortgages. Depending on your current interest rates, you may qualify for one or the other type of loan. The advantage of fixed-rate mortgages is that you know exactly what your monthly payments will be for the life of the loan. Adjustable-rate mortgages come with variable interest rates and can be confusing for the first-time homebuyer.
The best way for borrowers to make the most out of their loans is to get prequalified. To get a preapproved mortgage, borrowers fill out application forms at a specific dealership. If the borrower passes the credit test, he gets prequalified. In many areas, the lenders require borrowers to get prequalified so they can offer competitive rates. Most homeowners choose to take out a FHA mortgage because it offers lower interest rates.
Another way to save money is to choose a fixed interest rate over an adjustable interest rate. A fixed interest rate is one where the interest rate stays the same for the entire term of the loan. This allows borrowers to lock in a low interest rate so that they do not go through the process of adjusting the interest rate after it changes. It’s important to remember that the recent record lows in the past few months have been the lowest recorded rates ever at this point in history. With so much uncertainty associated with the current real estate market, homeowners need to take advantage of every opportunity to save money.
Mortgage lenders now offer a wide range of FHA loans to meet borrowers’ financing needs. Some loans are available through a variety of lenders, while others are offered by only a select few. To ensure you get the best rates, be sure to shop around. Also keep in mind that your credit score will affect how much you pay for your mortgage. If you have poor credit, it will be more difficult to find affordable loans but you will be able to find higher interest rates as well.