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Wondering about where mortgage rates are headed? Check out our latest Two-Month Mortgage Rate Forecast.

Wondering about where mortgage rates are headed? Check out our latest Two-Month Mortgage Rate Forecast.

Don't have 20% equity? Consider FHA refinance

Q: [HSH] wants the federal government to issue "value gap coverage". That would be for those homeowners who are underwater. But, what about those (my son) who are not underwater, but do not have the 20% equity to refinance?

A: It's a little bit of a myth that you need a 20% equity stake to refinance today. Borrowers with jumbo mortgages have the most significant challenges in this regard and will need to shop around very hard to try to find a mortgage lender who will refinance at a higher loan-to-value (LTV) ratio. However, borrowers with more modestly-priced homes can refinance into the FHA program, where rock-bottom interest rates are available even if you don't have great credit. There are home-price limits, but you might be surprised how liberal they are.

Ask the expert
Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
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