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| As a syndicated columnist, author and international speaker, Julie Garton-Good has been called "America's Home Affordability Expert", addressing more than 25,000 persons annually on the topics of real estate finance and home affordability. |
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| Got An FHA Mortgage? Consider “Streamline Refi” |
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If you currently have an FHA mortgage
and have considered refinancing to a
lower interest rate, Uncle Sam’s got a
deal for you. It’s HUD’s “Streamline Refi”
and it’s available from FHA lenders nationwide.
If you haven’t heard of the FHA
Streamline Refinance, you’re not alone.
It’s a program exclusive to current FHA
mortgage holders; and, until lately, that club
has been proportionately pretty small. But
since the FHA-insured mortgage market
share has increased almost ten-fold since
2006, the streamline refi is no longer flying
under the radar. Even when Fannie Mae
and Freddie Mac secondary market loans
have tightened guidelines, FHA Streamline
Refis remained flexible, beating the other
refinancing programs hands down.
FHA STREAMLINE REFINANCING MAKES DOLLARS AND SENSE
There are a variety of reasons why FHA
Streamline Refis are superior to traditional
mortgage refinances. For example, FHA
won’t allow you to refinance unless your
new payment is less than your current one.
This prevents you from overextending
yourself on mortgage payments. You can
take no cash out with a streamline refi so
your equity stays intact and continues
to grow. FHA also won’t require an appraisal
for the refi. In fact, they don’t care
if you’re underwater with the loan (owing
more than house is currently worth).
That’s because the loan carries mortgage
insurance, indemnifying the lender against
loss. Should you default on the loan, the
insurance kicks in and covers the loss.
And FHA Streamline Refinances are cost
effective. If you’ve had the house less than
five years, FHA refunds a portion of your
closing costs directly to your bottom line
at closing.
What if you want to refinance an FHA
loan that’s not on your primary residence?
That’s fine with FHA. In fact, second
homes and investor properties can qualify
for the streamline refi. HUD will even let
you add an individual to the title without
credit worthiness review which could be
beneficial if you purchased the property
prior to entering into marriage or a partnership.
And, unlike many refinances, if
there’s a second mortgage on the property,
it can remain undisturbed. The only criterion
is that it continues to be subordinate
to the new FHA first mortgage.
QUALIFYING GUIDELINES
In the qualifying department, there
are myriad differences between the FHA
Streamline Refi program and conventional
mortgage refinances. A huge hurdle for
homeowners wishing to refinance today
is pay cuts, loss of overtime, and/or loss
of a second job. The FHA Streamline
Refinance circumvents this issue by not
requiring you to show paystubs, W-2
statements, or tax returns. All you have
to do is prove that you’re still employed.
The lender’s call to the HR department of
your employer can verify that.
This stems from FHA’s philosophy that
if you’re making your payments on time
at the higher rate, you’ll likely be able to
continue to do so at the lower one. And
since there’s very little paperwork for
the streamline refi, loan processing and
closing are accelerated.
So what are the general qualifying
guidelines for obtaining an FHA Streamline
Refi? Homeowners must be current
on their mortgage payments. That means
you must have made all of your mortgage
payments on time in the past twelve
months. The only exception to this rule
is, if the borrower is no more than two
months delinquent on payments at the
time of application, the lender can bring
the payments current and then make the
new refinance.
You must have had your current FHA
loan for at least six months, and the new
loan size can’t exceed the amount of the
original FHA loan being replaced. Also,
some, but not all, FHA lenders may have a
minimum credit score requirement. As of
June, 2009, the most common minimum
score is 620. But again, not all lenders
have this requirement or may have a
lower minimum score requirement, so
it could pay to shop around if this is an
issue for you.
CLOSING COST
REQUIREMENTS
As with all new loans, you’ll have closing
cost requirements for the refinance.
There are title charges, underwriting
charges, and other typical refinance fees.
You’ll also have to pay FHA’s upfront
mortgage insurance premium. MIP often
equals one-and-a-half percent of the loan
size and is rolled into the mortgage. If
your current mortgage is less than three
years old, FHA will refund a portion of
your original upfront mortgage insurance
premium at closing, applying it to your
settlement statement credits at closing.
Unlike many conventional loan refinances,
there are no underwriting fees for the FHA
Streamline Refi.
The bottom line is that FHA encourages
consumers to refinance their FHA
mortgage to a lower rate in order to help
keep home ownership affordable. The
consumer wins with a lower interest rate
and payment, and the FHA is more likely
to keep a performing asset on the books
and sidestep foreclosure. It’s a win/win
all around.
For additional information about FHA
Streamline Refinances, contact your local
lender and/or access information online
Click Here. |
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