FHA opens door to homeowners who need to refinance mortgages

Millions of homeowners are, or soon will be, facing significantly higher mortgage payments as more than $140 billion in adjustable rate mortgages were adjusted in 2007. Another $380 billion are scheduled to reset higher this year.

In times past, many of these consumers simply would have refinanced their mortgage. But many are now finding that current lending restrictions and declining home values have made refinancing difficult. Enter one stalwart that is making a welcome comeback: The Federal Housing Administration loan.

Dating back to the 1930s, the FHA loan has traditionally been used by first-time home buyers because the program requires a down payment of as little as 3 percent, which can be gifted from a relative, and features relaxed credit guidelines.

Today, many homeowners also are turning to the FHA loan to refinance a home.

"Eroding home values have drained the equity out of homes in many markets. Many homeowners are unable to refinance an existing mortgage if they have less than 20 percent equity in their home," says Bob Walters, chief economist for Quicken Loans, one of the nation's largest lenders.

Walters recommends that homeowners who find themselves in this situation consider an FHA loan.

"Many homeowners are finding the FHA program to be their best solution. It's ideal for those who need to refinance out of an ARM because it requires much less equity, with interest rates that are extremely competitive with conventional loans."

"FHA programs also are an attractive option for people wishing to purchase a home, especially those who may have the income to support their monthly payment, but don't have the cash for a 20 percent down payment or a lengthy credit history," he adds.

As one of America's largest mortgage companies and an FHA-approved lender, Quicken Loans offers industry-leading technology that enables clients to review and sign documents securely on the Web, making the home loan process fast, safe and easy.