Mortgage Refinance Options


If you are looking to refinance your mortgage you need to know what mortgage refinance options are available so that you can make a wise decision. With mortgage interest rates at their lowest point in decades now is a great time to refinance into a new loan.  While rates are quite low for new and refinanced mortgages, many borrowers do not qualify for a new mortgage for a variety of reasons including tightened lending requirements and declining housing prices across the country. While getting a loan is much harder today from traditional lenders, there are a variety of mortgage refinancing alternatives which a borrower may qualify for.

The first of the mortgage refinance options to consider would be refinancing into a Federal Housing Administration (FHA) mortgage. While lending standards regarding loan-to-value and other metrics have increased quite a bit over the past few years, the FHA will still provide mortgage refinancing options to borrowers who may not otherwise qualify for a loan. With FHA mortgage refinancing options a borrower could get a loan with as little as 3.5% equity in their home. This metric is far lower than a traditional mortgage lender that would require between 10% and 20% in order to get a loan. However, getting a FHA loan with this little down may still require the borrower to pay Private Mortgage Insurance (PMI) each month.

The second of the mortgage refinance options to consider would be taking advantage of the federal home affordability program which is established to help struggling homeowners refinance into a more affordable mortgage. The federal home affordability program is designed to help people who have already fallen behind on their mortgage payments, so even those with poor credit scores could qualify. The program is available for any borrower who has a Fannie Mae or Freddie Mac owned mortgage and could help reduce a borrower’s payment three different ways. First the program will attempt to reduce the payment to an affordable level by reducing the interest rate to as low as 2%, then they will extend the amortization period to up to 40 years, and finally these mortgage refinancing options will attempt to lower the payment by forbearing principal payments on up to 30% of the existing balance.

The third alternative way to refinance your mortgage would be to try and work with a bad credit mortgage lender. While most traditional mortgage lenders have drastically reduced the amount of lending they will do to people with bad credit, bad credit mortgage lenders specialize in providing refinanced mortgage options to those with bad credit. While a borrower may qualify for a bad credit mortgage, they should be aware that the rates and fees associated with these loans tend to be higher than traditional mortgages and the terms available are normally far shorter than the 30 years provided by most lenders. This means that a borrower may have to end up refinancing their loan again if the loan is not paid off by the time the loan matures. However, this loan could still be the best option of someone looking to lower their payment and begin to rebuild their credit history.