How to Refinance an FHA and a PMI

October 20, 2011 by  Filed under: Loans 

Depending on the economy, mortgage rates will drop and hence there is need for people refinance their home loans so that they do not have a lot of interests to pay. Companies will reduce the interest rates they charge on loans and those who have already borrowed money will have the opportunity to have the interests charged on their mortgages reduced. This will save you a lot of money if you are a homeowner since you will be paying less interest on the mortgage. Who does not want to pay less interest on their mortgages? Even when your refinance, you will still need to pay PMI although this will be much reduced thanks to the reduced rates of interest.

You will need your social security card, driver’s license and mortgage statement to get a refinance. You may have to submit other documents like recent paychecks to determine your income, so you need to have this on your hands as well just in case you are asked. There are some requirements that you will need to meet when you want to refinance your mortgage, one of them being the fact that you have been making good payments. If you have not been making them on time, you may not qualify. Call your bank to find out other requirements that you will need to meet before you are eligible for a refinance. Your current mortgage must have been insured by the FHA for you to get a refinance.

Your lender will check your credit score, which will also determine the interest rates that will be charged on you. A higher credit score will mean that you will be charged less interests. You should aim to have a good credit score so ensure that you have paid your mortgage in time. Your lender will appraise your home and its current value determined. This will ensure that you have enough equity in your home and hence you will qualify to get a refinance. Some lenders will insist that you have higher equity on your home to get a refinance, so ensure that this is the case.

If all your paperwork is in order, your lender will approve your refinancing and its percentage interest rates will be determined. When this is approved, you will not have to pay any more PMI. What you will pay is a premium on the FHA loan, which is a small percentage of the loan.

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