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FHA Home Loans >> Fixed-Rate Benefits
Benefits of Refinancing Into an FHA Fixed-Rate Mortgage
by Brandon Cornett
For some homeowners, the benefits of refinancing from an adjustable to a fixed-rate mortgage are fairly obvious. But for others, the advantages are less clear. So in this article, I'd like to explain some of the key benefits you get when you refinance from an adjustable-rate mortgage into a fixed mortgage, using the FHA home loan program.
A More Predictable Mortgage Loan
Refinancing from an ARM loan into an FHA fixed-rate mortgage helps you move from something uncertain into something certain. What does this mean? It means your interest rate will never change over the life of the new loan. That is what "fixed" means within this context.
On the contrary, an adjustable-rate mortgage will eventually live up to its name. After the introductory period (during which the interest rate may remain fixed), an adjustable mortgage will reset to a different interest-rate on a regular basis. It may reset every year or every few years, depending on the terms of the loan. In most cases, this means the mortgage will take on a higher interest rate.
This is one of the key benefits of refinancing into an FHA fixed-rate home loan. You move from something unpredictable into something completely predictable. Many people make the gamble of using an ARM loan, because they think they will be able to refinance before the loan starts adjusting. Sometimes this works, and other times it does not. For example, take a look at the housing crisis and economic recession we faced in 2009. Many homeowners saw their home values drop so low that refinancing was not an option -- because they owed more on the home than it was worth in the current market. Like I said, it's a gamble.
Refinancing out of the adjustable mortgage and into an FHA fixed mortgage removes all of this uncertainty and risk. Even if you have the new loan for 15, 20 or 30 years, you can be certain that the rate will never change.
It's Easier to Qualify for FHA Refinancing
It's possible to refinance into a fixed rate by using a traditional mortgage loan, one that is not backed by FHA insurance. But the underwriting guidelines are generally stricter for non-FHA loans. In other words, it's harder to qualify for refinancing without FHA backing.
Mortgage lenders receive insurance from the Federal Housing Administration that protects them in the event that the homeowner defaults on the loan. So they are more inclined to qualify someone who, for example, has less than perfect credit.
This is another key benefit of refinancing into a fixed-rate FHA home loan. The underwriting guidelines are less strict, which means it's easier to get approved for such a loan.
Are You Qualified for an FHA Home Loan?
There's only one way to find out if you qualify for refinancing under the FHA loan program, and that is to apply for a refinance loan. To do this, you would first need to find an FHA-approved lender in your area. You can find a list of these lenders through the Federal Housing Administration website. Or you can get started by using the link provided on the main FHA page of our website.
