Adjustable rate mortgages (ARM) once seemed like a good idea.
Those days are over.
When interest rates were low, homeowners were reaping the benefits.
Then the rates rose quickly and owners found themselves facing payments that they weren't financially prepared to repay.
Government Intervention As the crisis unfolded, the foreclosure lists began to grow.
Borrowers were expected to pay monthly mortgage bills that were double or triple previous payments.
The mortgage payments became impossible for owners to meet.
They fell behind and foreclosures increased.
The federal government opted to step in to help curb the growing trend because interest rates were considered an unpredictable problem.
It wasn't completely the borrower's fault they fell behind.
During this period, refinancing became impossible to obtain.
The government offered a program so borrowers could qualify for refinancing to take hold of out-of-control payments.
FHA Loan The Federal Housing Administration (FHA) offers the FHA Secure Refinance Program to borrowers with ARM loans.
Homeowners can be guaranteed a fixed rate loan to replace their current ARM.
This is designed to bring the monthly payments down to a manageable amount.
FHA obtains the loans from reputable lenders that they work with.
So the borrower is not receiving taxpayer money; it comes from a lender willing to work with borrowers.
Since the government qualifies the borrower themselves, the odds of getting the loan are very good.
Borrowers can feel secure in obtaining the loan since these companies are not fraudulent or scams in disguise.
These are honest loans.
FHA Qualifications To obtain an FHA loan the borrower must already have an adjustable rate loan.
The payment history needs to be spotless prior to the ARM jump.
Additionally, the borrower must prove that they have the income to cover the new payment.
Sometimes, the government requires the borrower to have at least 3% equity on hand.
Normally refinancing is impossible for those with bad credit ratings.
Since this is a government program, the qualifications are different.
For example, bills that have been paid on time are weighed more than a good credit score.
FHA loans are not intended for everyone facing foreclosure.
They were designed to help those caught in the ARM trap.
Government assistance isn't supposed to be a permanent solution.
It is meant to be a one-time fix for borrowers struck hard by the abrupt interest rate rise.
It is simply transferring a debt into a more manageable form.
The borrower, however, still needs to build a longer-term plan to pay off the debt cleared.
Those days are over.
When interest rates were low, homeowners were reaping the benefits.
Then the rates rose quickly and owners found themselves facing payments that they weren't financially prepared to repay.
Government Intervention As the crisis unfolded, the foreclosure lists began to grow.
Borrowers were expected to pay monthly mortgage bills that were double or triple previous payments.
The mortgage payments became impossible for owners to meet.
They fell behind and foreclosures increased.
The federal government opted to step in to help curb the growing trend because interest rates were considered an unpredictable problem.
It wasn't completely the borrower's fault they fell behind.
During this period, refinancing became impossible to obtain.
The government offered a program so borrowers could qualify for refinancing to take hold of out-of-control payments.
FHA Loan The Federal Housing Administration (FHA) offers the FHA Secure Refinance Program to borrowers with ARM loans.
Homeowners can be guaranteed a fixed rate loan to replace their current ARM.
This is designed to bring the monthly payments down to a manageable amount.
FHA obtains the loans from reputable lenders that they work with.
So the borrower is not receiving taxpayer money; it comes from a lender willing to work with borrowers.
Since the government qualifies the borrower themselves, the odds of getting the loan are very good.
Borrowers can feel secure in obtaining the loan since these companies are not fraudulent or scams in disguise.
These are honest loans.
FHA Qualifications To obtain an FHA loan the borrower must already have an adjustable rate loan.
The payment history needs to be spotless prior to the ARM jump.
Additionally, the borrower must prove that they have the income to cover the new payment.
Sometimes, the government requires the borrower to have at least 3% equity on hand.
Normally refinancing is impossible for those with bad credit ratings.
Since this is a government program, the qualifications are different.
For example, bills that have been paid on time are weighed more than a good credit score.
FHA loans are not intended for everyone facing foreclosure.
They were designed to help those caught in the ARM trap.
Government assistance isn't supposed to be a permanent solution.
It is meant to be a one-time fix for borrowers struck hard by the abrupt interest rate rise.
It is simply transferring a debt into a more manageable form.
The borrower, however, still needs to build a longer-term plan to pay off the debt cleared.