Are you a good borrower who has struggled recently with late mortgage payments because your adjustable loan was reset to a high rate, or because of a temporary financial hardship?
The good news is that you may be able to take advantage of the FHA Secure refinance program and get into a 30 year fixed rate mortgage. The potential bad news is that you have to qualify using the standard FHA debt ratio, which may be one reason why you have your current loan.
What is FHA Secure? It’s a refinance mortgage program designed by FHA to help you if you had good credit until the interest rate on your adjustable mortgage was reset or recast to where the monthly payments were too high to handle, resulting in late or delinquent payments.
What are the benefits? Providing that you qualify, an FHA Secure refinance can:
· Allow for late mortgage payments which normally disqualifies a loan
· Refinance a high adjustable rate into a 30 year fixed rate mortgage
· Allow financing for your home with as little as 3.5% home equity
· Provide help to avoid defaulting on your mortgage and keep your house
The new FHA Secure loan is a rate and term refinance, with no cash out allowed. If there is enough equity available, the loan can include money to cover past due mortgage payments, closing costs, and late fees. The loan applies only to an owner occupied principal residence.
How do you qualify? The general requirements for FHA Secure include:
· The rate reset was the only cause of the delinquent mortgage payments
· Credit must have been good for at least 6 months prior to the rate reset
· The mortgage being refinanced is a non-FHA adjustable rate mortgage
· Must have sufficient income to qualify for the new mortgage payments
· A sustained verifiable history of employment for a minimum of 2 years
· A letter of explanation regarding the late payments should be provided
One of the primary goals of the FHA Secure refinance is to help restore liquidity and stability to the real estate markets, which includes assistance to subprime borrowers. It can assist people who have missed up to three mortgage payments over the previous 12 months. The program can also help people who have experienced a temporary economic hardship, such as medical expenses, loss of overtime pay, as well as those affected by payment shock from a rate reset.
Any type of conventional loan can be refinanced with FHA Secure, as long as you have been current on your mortgage for the last 6 months, and have sufficient income for the payment. If you are delinquent now, the default must have been due to the payment shock of a mortgage rate reset or, in the case of an Option ARM, the recasting of your mortgage to a fully amortized loan.
To determine the maximum loan amount, FHA will rely on a current home appraisal, even if you have owned the home for less than one year, and may review appraisals in declining markets.
