Conventional, VA and FHA Mortgage Refinance

There are pros and cons to getting a conventional, VA, or FHA mortgage loan. The guidelines for these home loans change regularly, so it can be very difficult to keep up with all the new revisions. There are certain things that determine what type of loan is best for you. Some of these include your credit rating, your income, the mortgage lending value of your home, or how much money you need to put up when buying a home.

Conventional mortgage refinancing
A traditional mortgage refinance used to be one of the most popular loans because you could split it 80/20 and didn’t have to pay mortgage insurance. Conventional assessments are also not as strict on their guidelines as FHA. Because the economy is very slow and people don’t have much money to raise for their homes, traditional credit has slowly diminished over the years. Many lenders have also tightened their credit score guidelines, which has prevented many people from obtaining a traditional mortgage. If someone can’t afford 20 percent for a home, the monthly mortgage insurance is very high with a traditional loan. The monthly insurance premium can range from 1 percent to 2.5 percent of the monthly payment. These huge costs can really affect whether someone can qualify for the loan based on their debt-to-income ratio. For people who are able to raise 20 percent on a home or mortgage refinance and have at least 20 percent equity, a traditional loan is the best option to choose from. Some lenders offer a 40-year term on these or an interest rate option that allows the homeowner to better afford their monthly mortgage payment.

FHA Mortgage Refinance
FHA mortgage refinancing began to become very popular in the 1990’s. The real estate market began to take a big turn and home prices began to skyrocket. Many people couldn’t afford their own home back then and needed mortgage refinancing that didn’t require a large down payment. FHA loans are also great for young people who are just starting out and don’t have a lot of money saved for a home, or if they want to receive a gift from someone as part of their down payment. A person buying a home on an FHA loan can also have the seller pay up to 6% of their closing costs. This can save the homebuyer thousands of dollars or help them qualify if they don’t have the money for closing costs. The down payment on an FHA loan is 3.5 percent and the upfront mortgage insurance premium is 1.75 percent. The monthly cost of mortgage insurance is 0.55 percent. An FHA loan is still a great option for a first-time homebuyer, and the credit standards aren’t as strict as with a traditional loan. The majority of lenders now require a minimum credit score of 620 or greater to qualify. The FHA also offers a program called FHA Streamline, which allows a homeowner to refinance their mortgage at a lower interest rate without paying the high cost of a regular refinance. Also, most lenders do not require another property appraisal when a homeowner completes an FHA rationalization. The homeowner must have at least 12 months of on-time mortgage payments to qualify for this type of refinance.

VA Mortgage Refinance
A VA mortgage is a great way for a veteran to get a home loan without a big expense. A person receiving a VA loan must have excellent credit, but many lenders require a minimum credit score of 600. There is no monthly mortgage insurance premium on a VA loan, which really saves the homeowner a lot of money when paying off their home loan. The VA requires that a financing fee be paid on the loan upon settlement. This funding fee is 3 percent for a purchase and 1.5 percent for a refinance. The veteran is exempt from these funding fees if determined by the VA to be disabled. The financing fee can go into the loan, unlike an FHA loan. This saves the veteran money up front if he didn’t save it for the house. The seller of the home can also pay this financing fee for the veteran if they choose.