Saturday, 25 January 2014

Tips to avail low interest rate for an Investment property

Every one wishes to save some dollars and yet enjoy life to the fullest. Among the many investments there is one very important and popular among our citizens is property investment. But the interest rate has been the hurdle every time. However there are ways to get a low interest rate on an Investment property. FHA aka Federal housing administration promotes homeownership through the traditional lending measures to people who have a low debt-income ratio or people with not so high credit score etc. They lend their shoulders to the housing market by providing a cord line of financing to people with low home equity. Now we need to know the requirements for achieving a FHA loan to invest on a property.
Any mortgage lender would tell you that FHA loan is for primary residence only, but this is just part of the story. To be very specific there are two exceptions:
1. Rental Property: Exceptions coming under the following scenario will obviously score high in any test. Suppose, a house was purchased and the owner resided for a year and later on purchased a different home and shifted his primary residence with renting out the first home since then. If ever the property had been the primary residence and the loan was an FHA-insured mortgage, the actual property could be refinanced with the help of an FHA loan.
2. Second Home: Alike the above exception, if the case was as such where a home was purchased and the owner resided in for some time and the loan on the property was an FHA loan. While residing in the property, the owner shifted on to a new property by purchasing it and has turned the first home to a second home who can be used as a vacation property as well where family and relatives could gather couple of times round the year.
The prime factor in both the cases is that the property needs to be the primary residence previously and it has to be attached with a current FHA loan. A consumer having the above criteria will also have the benefit of refinancing the loan with the aid of FHA Streamline Refinance Program. However, payment-reduction refinance will be an acceptable but you won’t have the facility of cashing out.
Do look out for Current FHA Mortgage Insurance premiums
Each and every consumer should keep themselves informed about the changes that take place. The market keeps changing and presently FHA has increased the mortgage insurance premiums and that is the reason FHA streamline refinance has become less popular among people as mortgage insurance premiums are comparatively higher.

The procedure of FHA is that they charge an upfront 1.75% mortgage insurance premium loan amount which is amortized over the term of the loan. Furthermore, there is an additional monthly mortgage insurance premium that is based on 1.35% of the base loan amount on an annual basis. To be precise about the base loan amount it is amount at the stage before financing of the upfront mortgage insurance premium.

Suppose you are in need of money for some personal reasons and you take a loan of $400,000. Now with the upfront mortgage insurance premium, the complete loan amount will be 407,000 as said earlier that FHA charges an upfront 1.75%, 1.75% of 400,000 would result to $7000, and it is refinanced over the term of the loan. Along with this would be the annual rate of 1.35% of the base loan amount, which in this scenario would stand to $5400 a year and you have an additional $450 monthly mortgage insurance payment.
Deals associated with FHA Streamline Refinance
It’s always essential for you to keep track of mortgage rates and information’s associated with it and its associates. And for that very reason you should know that there is a loophole in an FHA premium. Although your property is an investment property or second home that at some time had been your primary residence, you still could avail the benefits of a lower FHA Streamline, if you took out the original mortgage before 31st May, 2009.

Then there are other scenarios that clarify the picture of rates changing very often. The upfront mortgage insurance premium drops to just 0.01% of the loan amount and the premium paid monthly is 0.55% on an annual basis of the base loan amount. Keeping in mind our example given above explaining the overall scenario, these numbers keep changing. The upfront financed fee may drop to $40 and the premium paid monthly might have a drop down of $183 which seems quite attractive in case of a secondary home or an investment property if you are thinking of one among these.

This loophole would apply to cases where your house is the primary residence and you are willing to refinance. Also, the terms of the mortgage insurance in this particular FHA loophole does not change with the status of occupancy.

Scenario for FHA Mortgages in case of Two Homes

You must know that if you wish you can have two FHA mortgage loans at the same time.

Do you wish to use FHA mortgage to buy another main residence? If your answer is yes then here are a few scenarios in which you would be considered for a second FHA mortgaged property and they are as follows:
1. The new property is outside of a sensible drive time from the separation of your present essential home.
2. Your developing family makes the requirement for "additional house."
3. You're leaving from a mutually claimed property with an alternate gathering.

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