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Why an FHA Refinance Loan may work for you!

The original purpose of FHA loan program was to drive new home ownership. In today’s market place, many borrowers are now turning to FHA loan programs to refinance their home mortgage. Refinancing your current mortgage to an FHA loan can result in a lower monthly payment. Our borrowers also refinance to consolidate or eliminate higher interest credit card, store account, and auto loan debt.

On average First Direct Lending’s customers save $567 on their mortgage when they refinance into a FHA loan.

FHA Loan Qualifications

So what does it take to qualify for a FHA loan? Below are a few guidelines required for a FHA loan.

  • FHA loans accept lower FICO scores than what is normally required for a conventional mortgage. First Direct Lending is one of the few lenders to work with borrowers that have credit scores as low as 500.
  • A FHA loan will have specific state and county lending limits, based on a percentage of your home’s value. These vary by state and region and are published online.
  • Down payments required for FHA loans may be as low as 3.5%.

Your First Direct Lending loan consultant can help determine if this is the right loan for you.

About 50% of First Direct Lending clients refinance to a FHA Loan.
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FHA Refinancing Loan for Bad Credit

A FHA mortgage allows lenders to look at a borrower’s overall credit and income history and current situation rather than looking at just a checklist. FHA lenders, like First Direct Lending, are allowed to make exceptions for certain items in your credit history (bankruptcies, late payments and foreclosures). This is what has allowed First Direct Lending to help so many borrowers that were previously declined by other lenders.

FHA Loans Versus Conventional Loans

An FHA borrowers may enjoy lower down payments, low-cost FHA Insurance, rates competitive with the best conventional loans, and loans that are easier to qualify for. You may qualify for and FHA loan even if you’ve been turned down for a conventional loan or have had credit issues (such as a bankruptcy or foreclosure) in the past. The chart below outlines the differences when comparing a FHA loan option to a conventional loan. FHA loans offer different advantages over conventional loans.

FHA Loans Versus Conventional Loans Comparisons

FHA Loans Conventional Loans
Credit Scores Requirements Borrowers may qualify with FICO scores as low as 500 for a FHA loan. Conventional loans typically require a minimum credit score of 620 or above.
Debt to Income Ratios FHA borrowers may qualify with a higher total monthly debt to income ratio. Typically conventional loans will have a 43% maximum of debt to income ratio.
Lower Interest Rates and Lower Payments FHA borrowers may still qualify with lower credit ratings and some credit issues for low competitive rates. Traditional loan rates vary based on market conditions, credit rating and ability to pay and more.
Down Payment Minimums FHA loans accept down payments minimums of 3.5%. Most conventional loans will require at least a 10% or more down payment.
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