Guidelines and Information for FHA Streamline Refinancing
Guidelines and information regarding FHA Streamline Refinance for current homeowners with an FHA mortgage. Only homeowners who currently have an FHA loan on their property are eligible to use an FHA streamline refinance.
Are you FHA (Federal Housing Administration) Streamline Eligible?
– have an FHA mortgage right now.
– Most recent 12-month payment history is on time.
– Net Tangible Benefit: The FHA stipulates that your monthly payment must drop by at least 5% or that you must switch from an adjustable rate mortgage (ARM) to a fixed rate mortgage.
Consider the fact that there are no appraisals necessary with an FHA streamline refinance. This is a huge benefit for homeowners who currently owe more on their home than it is worth. Since the FHA is already backing the loan, they are already liable to the lender in the event that a homeowner defaults and the loan is foreclosed. Therefore, it is in the FHA’s best interest to refinance a borrower into a lower rate and lower payment, without considering the value of the property. In contrast to the HARP program, an FHA streamline refinance has no maximum loan to value (LTV) limits. The LTV limits for HARP loans are still capped by some lenders, whereas FHA has no restrictions based on the lender of choice. If the FHA backs the loan and it benefits the borrower, for instance, a homeowner who has a mortgage with a balance of $400,000 but a home worth $50,000 may be able to refinance without the need for an appraisal.
The fact that the mortgage interest rates associated with FHA streamline loans are frequently lower than those associated with conforming or conventional loans is another significant advantage. A conforming loan’s 30 year fixed rate is currently in the mid 3’s and an FHA loan’s rate is currently in the low 3’s.
There is no income verification, which is one advantage of the rules. Which is also a big win for homeowners since a lot of them are now employed at jobs that pay less than they did when they first bought their homes due to the current economic climate. This rule allows you to apply as long as you are currently employed.
Although the FHA stipulates a minimum credit score of 500, most lenders will only approve a borrower if their credit score is 620 or higher. A borrower must also be current at the time the streamline refinance is finished and have only one late payment in the previous 12 months to be considered creditworthy.
Only the upfront mortgage insurance premiums may be rolled into an FHA streamline refinance; closing costs are not permitted. Either the borrower must pay the remaining closing costs in order to close, or they must accept a refinance with “no closing costs” at a slightly higher interest rate.
FHA Mortgage Insurance Requirements
When it comes to the requirements for mortgage insurance, there are two different types of FHA streamline refinances. You might be able to refinance your loan with a lot lower closing costs if your current FHA mortgage was written before June 1st, 2009.
The upfront MIP (Mortgage Insurance Premium) is typically 1.75% of the current loan balance and the annual MIP is typically between 1.20% and 1.25% of the initial loan amount when someone refinances an FHA using the streamline program.
The Price of, Say:
– $200,000 Loan at 1.75% Upfront MIP and 1.25% Annual MIP
– 1.75% Upfront MIP equals $3,500
– 1.25% Annual MIP equals $208.33 a month
However, if your FHA mortgage was approved before June 1, 2009, the upfront MIP will only be.01% of the loan amount and the annual MIP will only be.55%.
The Price Associated With:
– $200,000 Loan at.01% Upfront MIP and.55 Annual MIP
-.01% Upfront MIP equals just $20
-.55% Annual MIP equals $91.67 a month
For the Upfront MIP, closing costs are reduced by $3,480, and for the Annual MIP, closing costs are reduced by $116.66 each month, or nearly $7000 over five years.
