Home Mortgage Refinance Rates Pain Relief

When home mortgage refinance rates fall then refinancing home mortgages becomes very attractive. But why is it that you can never seem to get the lowest rates advertised? That $1,500 monthly payment on your 6% 30-year $250,000 mortgage loan is making you choose between paying your mortgage and paying for your groceries. If only you could find a way to refinance with a 5% rate you could be paying $1,300 a month instead, or even a 4% rate that could cut your monthly payment to $1,200 a month. That extra $300 could pay for a lot of groceries for your family each month. Well... keep reading and find out how to get those lower rates.

Conventional home mortgage loans will not usually offer the best home mortgage refinance rates due to the high risk lending institutions take by making these loans. While it is true that the lender has collateral in the value of the property, as we have seen in these last few years real estate prices can sometimes fall dramatically. Property foreclosures have made the FDIC (Federal Deposit Insurance Corporation) take over hundreds of failing banks in the last few years. Many homes had dropped in value so far that they were no longer worth as much as what was owed on them. Many home owners had to walk away from their homes. Lenders simply could not guarantee that they would get their money back by foreclosing anymore. So the higher risk is making lenders increase their interest rates to compensate.

So... that explains why you cannot seem to get those low advertised rates. But wait a minute, some people are getting those rates from somewhere. Those low rates are coming from a special type of mortgage loan known as an FHA (Federal Housing Administration) loan. The U.S. Government Department of Housing and Urban Development (HUD) works with conventional lenders to insure mortgage loans so the lending institution is protected from the costs of foreclosure. This allows the interest rates to be reduced for the borrower to the absolute minimum possible.

While most FHA loans are directed towards helping people buy their first home, they can also be used to refinance existing loans. One of the most practical and smart ways to save money, gain equity and pay off debts is by refinancing a high interest rate loan with a new low interest rate FHA loan that can save a person hundreds of dollars a month. Note that neither HUD nor the FHA actually lend you the money, that is still done by a conventional financial institution. HUD and FHA simply insure the loan for the lender. So if the house is foreclosed upon, the U.S. Government will pay the financial institution and then own the house.

The FHA was created in the Great Depression and is becoming very useful now during the current recession. Many home owners are now finding themselves in financial crisis and refinancing their mortgage loans with FHA loans. The lower FHA loan interest rates is how they are lowering their monthly payments and saving their homes.

There are many benefits to FHA loans:

Qualifying for an FHA loan is much simpler than a conventional loan, which means refinancing using an FHA loan is both quicker and easier. Bad credit will usually kill approval for a conventional loan, but usually does not affect FHA loans. Remember, the U.S. Government is insuring the loan so the lender cannot lose money on the loan. Down payments for conventional loans usually have high down payments exceeding 20% of the loan value. FHA loans have down payments as low as 3% leaving you more money to use for other things... like buying groceries.

Of course, the greatest reason people choose FHA refinance loans is the lower interest rates. FHA loans have so many benefits because federal law determines what goes into the loan contract instead of the financial institution. And since almost anyone can qualify for an FHA loan, why not make some calls yourself and see if you can reduce or eliminate some of your monthly financial pain.

Posted in: Mortgage,Rates,Refinance,Relief