You have made the right decision to start doing your research on the FHA Streamline Mortgage Refinance option that is available through the Federal Housing Association.
1.) How long have you had your current FHA loan? If your loan was endorsed by FHA before June 1, 2009 your chances of maximizing your savings with the Streamline Mortgage is very high.
The reason that the date is important is because FHA decided to increase its monthly mortgage insurance in 2010. Unfortunately… not only did they decide to increase it… they decided to more than double it!
So, if you decided to do just a standard refinance or purchase after that date – the PMI is outrageous.
But, in June 2012 – FHA decided to help out current homeowners that have been struggling with plummeting property values. At that time, FHA rolled out the newest guidelines that say if you received your FHA loan before May 2009 then you can qualify for the new Streamline Program with the “rolled back” Mortgage Insurance Premiums that are real similar to what they were when you took out the loan.
This is a HUGE advantage over others who are thinking about refinancing their FHA loans who have had them for shorter time frames.
2.) Secondly, not only did FHA say that the monthly MI would be less… but they also decided that the Upfront Funding fee would also be a fraction of what it normally is on new loans. This is another benefit to the FHA Streamline Refinance guidelines that were rolled out in June 2012.
3.) One thing to keep in mind though is what you want to do with your closing costs. With most loans you can include them into your loan – simply financing them. With the Streamline Program, FHA will not allow you to do that without having an appraisal completed so you have two options. First, you can pay them out of pocket and bring some cash to closing. Or, Secondly you can take a slightly higher than market interest rate and ask your loan officer to give you a “lender credit” to cover the fees and title work.
Most lenders will have this option, and if they don’t you may want to shop around. The lender credit is a great tool for homeowners to utilize.
4.) FHA Streamline Credit Requirements: Ok, you may be wondering what kind of credit scores are required for the Streamline Mortgage Refin. Well, the answer is across the board… each bank is going to require different credit scores. Some require a 660, some require a 640, and I have seen a few allowing scores in the high 500 range.
Keep in mind, that the lower your scores are – the better chance that your interest rate will be slightly higher than the teaser rates that you see on TV, mail, and internet.
5.) FHA Streamline Appraisal Requirements: Everyone always wants to avoid having an appraisal done – and the Streamline Mortgage is the best way to avoid it. If you have decent credit scores and are willing to work in your closing costs with the lender credit or bringing cash at closing (as mentioned above) then this is a fantastic option for you.
Having no appraisal is a HUGE deal for FHA homeowners living in California, Florida, Arizona, Nevada, and other “high Depreciation” states. Getting past the appraisal requirements is a great way to save money and to avoid risking your hard earned money on an appraisals that may – or may not – come in where you need it to.
6.) FHA Streamline Income Requirements: If you are considering the FHA Refinance than your income will be verified to simply check to see if you are still employed or have an income stream. Your debt ratios are not analyzed in most instances.
7.) FHA Streamline Refin Processing Time: Most lenders can process a Streamline Mortgage Refin quicker than other loans. Some in as little as 10 -12 days. If your lender is telling you 60-75 days to refin your loan than it is time to start shopping around again. Some banks are so backlogged with loans they are putting refinances on the backburner while they finish up the more “important” purchase deals that they have in the works. Don’t let your Loan Officer do this to you… keep shopping around if you are told more than 3 weeks to close your Streamline Refinance.
8.) FHA Streamline Refinance Mortgage Closing Costs: Keep in mind, a Streamline Mortgage is a reduced documentation loan. Since it is less work then your fees should be less as well. If a lender is trying to charge you more than $1000 in lender fees than you will definitely want to keep looking around. You can find a lender doing these on a regular basis for $600 or less.
9.) Escrows: Yes, you will need to set up your new escrow account… and depending on your monthly taxes and insurance this fee could look pretty daunting on Streamline Refinance.
Even though this is a big fee, keep in mind that you will get your CURRENT escrow balance back from your current lender. This usually gets refunded to you about 3 weeks after you close on your new loan. With you getting your escrow balance back then this makes the new escrow fees almost a wash.
Don’t let that be a discouragement, despite the fee the FHA Strealmine Refinance will still save you thousands in the long run.
10.) FHA Mortgage Term: FHA is strict with this program… if you are going to utilize the Streamline Mortgage, you will be required to keep the same term or longer than the one you have now. If you are on a 30 year term now… you will have to stay on the same term. You won’t be allowed to change it to a 15 or a 20 Year without an appraisal.