|
 |
Home >> Lending >> Home Mortgage
Delinquent Adjustable Rate Mortgage Loans
If your adjustable rate mortgage (ARM) will reset in the near future, or if your loan has already reset and your monthly payment has increased, refinancing with an FHA Secure loan may be a good alternative. The FHA Secure loan program allows borrowers, even those who are already at least three months behind on their current mortgage, to refinance their ARM into a fixed rate, thirty year mortgage. In the past, a delinquent mortgage could not be refinanced through FHA. However, the FHA Secure program has been expanded to be available to those who are delinquent on non-FHA ARMs.
Any conventional mortgage may be refinanced through FHA, including mortgage loans with teaser rates or interest only payments. FHA Secure is particularly helpful, however, to homeowners who had a non-FHA ARM and are now behind due to increased payments caused by the interest rate reset or loans which began to fully amortize both the interest and the principal. If you are delinquent, the delinquency must be caused by the loan reset. In other words, FHA Secure will not refinance delinquent mortgages caused by a change in income or other hardships.
Perhaps the most important reason for switching to FHA is that homeowners are entitled to a lower interest rate than the standard mortgage. However, FHA loans also offer a variety of other benefits. First, unlike the loan you may have right now, FHA loans do not have teaser rates, adjustable rates, or pre-payment penalties. Your payments will not suddenly skyrocket later in the life of your loan. Additionally, those who have FHA loans may also have additional foreclosure options if they suffer some type of financial hardship. FHA Secure will also allow you to combine first and junior mortgages into your loan providing that the total amount does not exceed the loan limit for your area.
As with most loan programs, several limitations exist, especially if you are delinquent. In addition to showing that your delinquency was caused by the reset of your adjustable rate mortgage, you will also need to satisfy FHA's general loan criteria. In other words, you must show that you have steady income sufficient to make the required minimum payment every month.
FHA also has strict rules on the amount of the loan, depending on the geographic location. The amount FHA is allowed to insure for a specific location is set by law and cannot be changed. However, if your loan would be for more than these limits, you might speak with your lender about refinancing the maximum amount through FHA and then establishing a second mortgage with another lender. In some cases, the lender might be willing to forgive a certain portion of the loan, depending of course on a variety of factors.
FHA will also only approve mortgages for up to 95% of the value of your home. What this means to you is that if your home is now worth less than the amount you owe on your current mortgage, FHA Secure can only help you so much. Other options exist however. For example, FHA could approve a loan to cover the first 95% of your home. You could then either consider taking out a second mortgage to cover the rest of the loan or your lender, especially if you are already on the verge of foreclosure or the amount is minimal, might consider discharging a portion of the loan. Of course, this would be up to your individual lender, and you would need to speak to someone within their loss mitigation department to get a more individualized answer.
If you are delinquent, the sooner you attempt to refinance, the better. FHA Secure can sometimes help those already in foreclosure, but the process is more uncertain and complicated.
Remember, anyone can refinance through FHA if it makes financial sense. However, unless you have an adjustable rate mortgage, your loan must be current.
Published on BankingQuestions.com 11/21/08
|
| |
|
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
