FHASecure is a program designed specifically for homeowners facing foreclosure due to non-FHA adjustable-rate mortgages, including hybrid ARMs, interest-only loans, option ARMs, and other variable mortgage products. The program doesn't modify your current mortgage; instead it refinances your current loan into a new FHA loan.
Who is Eligible for the FHASecure Program?
Contrary to initial reports, you don't have to be delinquent on your mortgage in order to qualify. You also don't have to wait until your rate resets to apply for a loan under the FHASecure program.
If you meet the following requirements and lending standards, you may be eligible to refinance through the FHASecure program:
- original loan was not an FHA mortgage
- payments prior to the reset were current
- no late payments in the six months prior to the reset
- adequate income to meet payments under a new mortgage
- debt-to-income ratio less than 41%
- minimum 3% equity in the home
- rate has reset or will reset by December 31, 2008
- remaining loan balance is lower than the local conforming limit.
As of March 6, 2008, conforming limits are regionally set. They range from $271,050 to $729,750. Local limits are a maximum of 125% of the local median home price.
If you are delinquent on your mortgage, the default must be due to interest rate shock following the reset. If you're in default due to other factors, you may not qualify for the program.
How do I Apply for the FHASecure Program?
If you believe you're eligible, contact an
FHA-approved lender. They can discuss your options and determine whether you're likely to qualify.
If your current loan includes prepayment penalties that would reduce your equity below allowable limits or you owe more than the current value of the home, your current lender will have to agree to waive the penalties, accept a short pay-off, or issue a small second loan to cover the difference between your new loan and the old loan.
What Are the Disadvantages of an FHA Loan?
Although the FHASecure program may help you save your home, there are downsides to accepting an FHA loan. In order to avoid impacting taxpayers, FHA loans include more fees than traditional home loans. In addition to the usual closing costs, FHA loans include a 1.5% upfront mortgage insurance fee. You're also charged mortgage insurance for the first five years. The insurance is an annualized .5% of the loan, paid over the course of 12 months.
Refinancing into an FHA loan via the FHASecure program can result in substantially reduced payments that will enable you to avoid foreclosure. If you believe you qualify, contact a lender today to discuss your options.