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Federal Housing Administration Lends a Hand to ARMs - The Latest Refinance Option

by Kristi  Shibata
Mortgage Directory Columnist

If you find yourself struggling to make monthly payments, facing increasing interest rates with adjustable rate mortgages, and on the brink of foreclosure, you are not alone. Thanks to last year's housing market downturn, the dream of homeownership began to slip away from many. Alarming rises in mortgage loan defaults triggered government and the lending industry efforts to help troubled homeowners keep that dream alive.

Refinancing Through FHA

The federal office of Housing and Urban Development (HUD) created FHASecure to help homeowners refinance from their adjustable rate mortgage to an FHA-insured mortgage. This affordable loan is intended to help homeowners who can demonstrate that they successfully made their ARM payments on time before loan reset to a higher interest rate. The program lasts until December 31, 2008 and gives homeowners a refinance option to help avoid foreclosure.

Requirements for FHASecure Eligibility

  • The current loan must be a non FHA ARM, either fully-amortizing or interest-only, and the property must be owner-occupied.
  • Homeowners delinquent on mortgage must be able to show that delinquency resulted from a mortgage interest rate reset.
  • Mortgage history for six months prior to a rate reset must have no late payments.
  • Applicants must meet underwriting guidelines applied to all FHA programs, such as acceptable income/employment, credit history, and basic eligibility. If current on mortgage but late on other debts, must be able to show delinquencies due to increased mortgage payment making it impossible to pay other debts.
  • There must be sufficient equity (about 3%) in the home. If not, the current lender or a new lender must be willing to give the borrower a second amount not eligible to be included in the new FHA mortgage.
  • Homeowners who are current on their mortgage must show that they have had or will face an ARM reset.
  • Borrowers must have an ARM which has or will reset between June 2005 and December 2009.

How to Get Started on a FHA Refinance Mortgage

FHA doesn't make the loans themselves; the agency provides the insurance to cover lenders who make the loans. Just like any mortgage, FHA loan rates and terms vary, so it pays to check with several lenders and work with one who you feel comfortable with and who gives you a fair deal.

If you're delinquent on your ARM loan or trying to avoid delinquency, the FHASecure program might be able to keep you out of financial trouble and in your home.

Sources About the Author
Kristi Shibata is a public relations and communication specialist and regular Mortgage Directory columnist. She graduated from University of California, San Diego, with a BA in Communications.

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