Many people dream of owning their own homes but only very few are able to pay cash for them. This is why FHA mortgages are one of popular methods to find a source for consumer credit. People who could not otherwise afford to own a house become homeowners with help of FHA mortgage insurance programs.

FHA is Federal Housing Administration. As part of U.S. Department of Housing and Urban Development (HUD), one of chief purposes of FHA is to help people obtain financing for their homes.

How FHA Mortgage Insurance Works

As stated earlier, FHA mortgage is a way for homebuyers to obtain financing for their homes. All home purchases require buyers to make a certain set percentage of total purchase price, called down payment. What FHA mortgage insurance does therefore is to allow a homebuyer to make a modest down payment and obtain a mortgage for balance of purchase price.

The mortgage loan itself is made by a bank, a savings and loan association, a mortgage company, a credit union, or any other lender. For it to become an FHA mortgage loan, lender would have to be approved by Federal Housing Administration. FHA (HUD0 insures then insures loan and pays lender if borrower defaults on mortgage. The protection offered by FHA mortgages to lenders allows them to be more liberal with their terms than prospective homeowner might otherwise obtain.

Tips on How to Refinance

Refinance Mortgage

Loan

Getting a refinance mortgage loan is a smart move for any homebuyer. This is especially true if interest rates are low. In world of finance, interest rates directly affect way mortgage rates behave. So if interest rates are low, then mortgage rates will also be low. Low mortgage rates in turn lead to bigger savings from your monthly payments. And with a refinance mortgage loan, you can take advantage of this basic financing concept and reduce your monthly repayments while at same time, increase your monthly savings.

Another important benefit of refinance mortgage loans is that gives borrower more flexibility. It allows you to change loan terms from a long one to something shorter. In this way, you can pay off principal more quickly, thus saving you from total interest charges.

Some Tips on How to Refinance

• Make sure that drop in interest rates is enough to make a refinance mortgage loan worthwhile
• To determine if refinancing will save you money, compare total costs to refinance, as well as interest rates
• Generally, lower interest rate, more points lending institution will charge
• While shopping around for a lender, ask each for a list of charges and costs you must pay at closing
• A lower interest rate gives you less interest to deduct on your income tax, which may increase your tax payments and decrease your total savings from refinancing