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FHA program cuts mortgage rates

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POSTED: June 15, 2011 11:18 a.m.

FHA Streamline interest rate reduction programs have much to offer. Have an FHA mortgage already? If yes, then the streamlined mortgage may be just the answer if the value of your house or credit has ever been brought into question by a mortgage lender.
The Federal Housing Administration (FHA) was originally created by congress in 1934 because the housing market was in shambles, which coincidently shares some striking similarities to today’s slumping market.
Back then, a traditional mortgage was limited to 50 percent of what the property was worth, which limited homeownership to only four out of 10 people. This number escalated to more than seven out of 10 at the height of our current housing crisis.
In today’s environment, mainstream home values are rapidly declining due to the bubble that was created by deregulation of our credit markets. This is a major cause for concern for those who still own their home and want to take advantage of the lowest interest rates in 50 years. Even if a homeowner has perfect credit, the lack of equity could prevent them from taking advantage of the current rates.
The depreciation in home values may bode well for the opportunistic investors, but for the majority of people just looking to get a lower interest rate on their home loan, this is an ongoing problem. In terms of refinancing, now having perfect credit is only half of the battle in today’s slumping housing market.
However, even in spite of this time of limited credit availability, there  are some opportunities out there, if you know where to look.
Streamline refinancing has been around since the early 1980s. It was first introduced by FHA with the general purpose of allowing the homeowner to take advantage of lower rates with less red tape.
One of the three options available on the streamline program is that it allows a mortgage interest rate to be decreased without an appraisal being done. The caveat here is that the mortgage loan that is going to be refinanced must already be an FHA mortgage. If this is the case, and you already have an FHA mortgage, coupled with on-time mortgage payments, this program offers an excellent opportunity to take advantage of a lower interest rate. Additionally, because Bryan County is in a Military Impact Area or MIA, the 1 percent up-front fee is avoided. This will save the borrower money, regardless of their loan size.
The existence of this program can also be helpful when deciding what type of loan to obtain when purchasing on a new home. If a VA loan isn’t an option, then the conventional loan will most likely be the other loan alternative when buying a house. Although the conventional loan has something similar to the FHA Streamline, the federal program offers more range and flexibility, in terms of the guidelines.
In terms of a purchase, streamlining won’t offer up any instant, up-front benefits. However, it will give you an option in the future of reducing your rate if they happen to decrease at some point over the term of your mortgage.

Barr is a mortgage broker with First Carolina Mortgage of Richmond Hill. Visit fcmloan.com or email barrwes@gmail.com.

 

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