A majority of homebuyers in Utah tend to be cash poor. Unfortunately, conventional home loans feature strict minimum requirements, cutting off those with a low credit score. The Utah housing first-time homebuyers programs provide a reprieve for those who do not qualify for the conventional home mortgage.
Utah FHA refinance is a top option if looking to refinance your mortgage. What exactly is the Utah FHA refinance and how does it work?
What is FHA Refinance?
FHA refinance is a program meant to allow homeowners to go from the current FHA loan into another mortgage. The FHA refinance is a great option if you are looking to reduce the interest rate on a current conventional or FHA home mortgage.
Since 1934, the Federal Housing Administration has been helping borrowers to obtain a mortgage, especially when they cannot qualify for the conventional home mortgage. All along, the FHA home mortgage has been a solid product with a long history of successful funding the first-time homebuyers.
The FHA refinance comes with advantages and disadvantages. Here is an overview of the benefits of the FHA refinance program.
- Utah FHA Refinance Features Relaxed Credit Requirements
The Federal Housing administration acknowledges that a majority of homebuyers may have fallen into some credit mistakes in the past. Although the FHA will not overlook the fact that these persons have defaulted, they do not leave such a person out in the cold. In that regard, if your credit score is above 580, you are allowed to refinance into FHA first time homebuyer programs Utah.
- By Choosing Utah FHA Refinance the Borrowers enjoy Low Down payment
Unless you qualify for the zero down payments mortgage programs like the VA home loan and the USDA home mortgage, the FHA provides the lowest down payments. Classified as one of the Utah housing down payment assistance program, the standard FHA home loan requires just a 3.5% down payment.
Moreover, the FHA home mortgage can come in the form of gift money, funding from blood relatives, or even a family friend. However, it is imperative that the benefactor illustrates they do not require the cashback.
- Requires Small Reserve Funds
When borrowing a mortgage. Utah mortgage lenders might require the borrower shows they have enough money in the bank account. This is some form of the emergency fund and cash to pay your bills in case of unexpected expenses. The FHA asks the eligible lenders also to check for reserve funds. However, compared to the different first-time homebuyers programs, the cash reserve limit is lower when you choose Utah FHA to refinance.
- Utah FHA Refinance Features Increased Allowance for Closing Cost Financing
Closing costs makes home buying feel more expensive. However, in most cases, the home sellers will help the buyer to pay the closing costs. The standard First-time homebuyer programs in Utah will limit the seller’s contributions to just 3% of the loan amount. However, the FHA refinance allows the sellers to contribute up to 6%. This should be enough when it comes to paying the closing cost.
- Enjoy Larger Income to Debt Ratio
The lenders will examine the mortgage borrower’s income and the debts in order to determine how much they can afford to repay. In most cases, the mortgage lenders cap the figure at 36%. The FHA is more flexible and allows that up to 43% of debt to income, while for extenuating circumstances, this could be up to 50%.
We have looked at the various advantages of the Utah FHA refinance option. Now, let us check the various disadvantages associated with the Utah refinancing option.
- Stricter Mortgage Insurance Requirements
The biggest drawback to the FHA Refinance is that the insurers require upfront and a monthly premium for the portion of mortgage exceeding 80% of the new home value. This is considering that the FHA refinance is inherently more dangerous. This alone is enough reason to keep off the FHA refinance option.
Minimum Property Standards
There are standards that mortgage borrowers must meet in terms of the type of home they are borrowing or refinancing against. This means that the borrower will not qualify to be allowed FHA refinancing on just any home.
- The FHA refinancing Loan Limits
Considering the FHA loan limits, the borrowers cannot afford to purchase a property that is located within the unusually pricey areas. Therefore, the FHA refinance option will make sense for those interested in properties within the lower-cost areas.
Are you interested in a home mortgage refinance? The Utah FHA refinance allows the borrowers to reduce the interest rates on their current mortgages. Moreover, refinancing the FHA home mortgage allows homeowners to take advantage of the rising property value and sell at a profit. Therefore, refinancing with the FHA home buying program could be an effective way to put that equity to work!