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FHA
MORTGAGE REPORTS
Posted on May 6, 2009
Filed under FHA Mortgages
"Tweet
Thanks for visiting The Mortgage Reports. To stay absolutely current on mortgage markets and important
guideline changes, be sure to take my free daily email alerts.
UPDATE: September 18, 2009: The FHA is changing its FHA Streamline Refinance guidelines effective
November 17, 2009. Some of the information on this page will be outdated soon. Review the new guidelines
here.
The FHA-insured mortgage market share has increased nearly 10-fold since 2006, indoctrinating first-time FHA
borrowers across Illinois, Ohio and everywhere else into the sometimes-rewarding world of FHA mortgages.
As mortgage rates fall, demand for FHA Streamline Refinances is off the charts.
Now, if you've never heard of an FHA Streamline Refinance, you're not alone. It's a program exclusive to FHA
homeowners and that a club that's been historically pretty small. As a result, FHA Streamline Refis have
tended to slip past the American Consciousness.
That doesn't make them less relevant, though.
For FHA homeowners, there are 3 major reason why the streamline refinance program can be superior to
traditional, Fannie Mae-like mortgage refinance.
1.It's consumer-friendly : The FHA won't approve your refinance unless the new mortgage payment is less
than your current one
2.It's housing market-friendly : The FHA doesn't ask for an appraisal of your home and doesn't care if you're
underwater
3.It's cost-friendly : If you've had your loan less than 5 years, the FHA refunds a portion of your original closing
costs directly to your bottom-line
So, although you may have been shoe-horned into FHA financing when you bought your home -- and maybe
that upset you -- whenever mortgage rates start to fall , you'll be super excited about your FHA Homeowner
status.
There's a host of differences between an FHA Streamline Refinance and a traditional conforming mortgage
refinance, actually. For one, FHA Streamline refinances don't require proof of income from the homeowner --
no paystubs, no W-2 statements, no tax returns. Instead, the homeowner must just prove that he's still
employed.
A phone call into Human Resources can accomplish that.
This "No Income Verification" nature of an FHA Streamline Refinance is in keeping with the FHA's over-riding
philosophy that homeowners making payments at a higher mortgage rate should logically be able to make
payments at a lower mortgage rate.
It's the same for the "no appraisal" requirement. Unlike conforming mortgages that are securitized and sold via
Wall Street, the Federal Housing Authority is the only insurer and guarantor of FHA home loans. Because of
this, the FHA isn't concerned about whether its borrowers' home lose value -- it's on the hook for the loan
either way.
The FHA is more concerned about helping FHA homeowners get payment relief because it knows lower
housing payment makes default less likely in the long-run.
However, getting approved for an FHA Streamline Refinance isn't a rubber stamp. It does come with some
obstacles.
1.Homeowners must be current on their mortgage payments. No 30-day, 60-day, or 90-day delinquencies are
allowed from the last 12 months.
2.Homeowners must have at least 6 months of history paying on their current mortgage. "Instant refis" are not
allowed.
3.The new loan size can't exceed the original size of the FHA loan being replaced
In addition, some lenders -- but not all -- impose minimum credit score requirements.
As of May 2009, the most common minimum credit score for an FHA Streamline Refinance is 620. Not every
lender has this requirement, though. At least one investors through which I lend, for example, allows credit
scores down to 500. Contact me directly if you've been told your FICO is too low for an FHA Streamline
Refinance -- I can help.
And then there's the closing costs.
Every home loan carries fees and FHA Streamline Refinances are no different. There's title charges,
underwriting charges and the other "normal" refinance fees. There's also the FHA's upfront mortgage
insurance premium, paid at every FHA closing. MIP often equals one-and-a-half percent of the loan size and
rolled right into the mortgage.
However, because the size of an FHA Streamline Refinance home loan can't exceed the starting size of the
FHA loan it's replacing, up-front mortgage insurance premiums can sometimes put homeowners in a position
where cash is required at closing. Opting for a "no cost" FHA Streamline Refi can diminish the likelihood of this
occurring, but there's no promise.
Thankfully, the FHA takes a pragmatic approach to upfront MIP.
If you're current FHA mortgage is less than 36 months old, the FHA will refund a portion of your original upfront
mortgage insurance at the time of closing, applying it directly to your settlement statement.
The refund chart is above. Similar to driving a car off the lot, the premium's refund value drops 20% in Month 1
after which it reduces by 2 percent per month until the 10 percent level in reached in Month 36.
A FHA homeowner that paid $3,000 in upfront MIP six months ago, therefore, would be entitled to a $2,100
refund. After 9 months, the refund falls to $1,920.
In three years, the FHA MIP refund falls to $300.
Now, because of how the FHA mortgage insurance refund process is structured, it should be obvious that the
FHA compels its borrowers to refinance into lower rate mortgages as soon as possible. The longer that
homeowners delay on the decision to refinance, after all, the lower their FHA rebate becomes and, therefore,
the higher will be their closing costs.
Again, this approach is consistent with the FHA's goal of getting its homeowners' mortgage payments down
whenever possible. The FHA incents people to "act now" as opposed to trying to wait out the market". ......
MORTGAGE REPORTS
Posted on May 6, 2009
Filed under FHA Mortgages
"Tweet
Thanks for visiting The Mortgage Reports. To stay absolutely current on mortgage markets and important
guideline changes, be sure to take my free daily email alerts.
UPDATE: September 18, 2009: The FHA is changing its FHA Streamline Refinance guidelines effective
November 17, 2009. Some of the information on this page will be outdated soon. Review the new guidelines
here.
The FHA-insured mortgage market share has increased nearly 10-fold since 2006, indoctrinating first-time FHA
borrowers across Illinois, Ohio and everywhere else into the sometimes-rewarding world of FHA mortgages.
As mortgage rates fall, demand for FHA Streamline Refinances is off the charts.
Now, if you've never heard of an FHA Streamline Refinance, you're not alone. It's a program exclusive to FHA
homeowners and that a club that's been historically pretty small. As a result, FHA Streamline Refis have
tended to slip past the American Consciousness.
That doesn't make them less relevant, though.
For FHA homeowners, there are 3 major reason why the streamline refinance program can be superior to
traditional, Fannie Mae-like mortgage refinance.
1.It's consumer-friendly : The FHA won't approve your refinance unless the new mortgage payment is less
than your current one
2.It's housing market-friendly : The FHA doesn't ask for an appraisal of your home and doesn't care if you're
underwater
3.It's cost-friendly : If you've had your loan less than 5 years, the FHA refunds a portion of your original closing
costs directly to your bottom-line
So, although you may have been shoe-horned into FHA financing when you bought your home -- and maybe
that upset you -- whenever mortgage rates start to fall , you'll be super excited about your FHA Homeowner
status.
There's a host of differences between an FHA Streamline Refinance and a traditional conforming mortgage
refinance, actually. For one, FHA Streamline refinances don't require proof of income from the homeowner --
no paystubs, no W-2 statements, no tax returns. Instead, the homeowner must just prove that he's still
employed.
A phone call into Human Resources can accomplish that.
This "No Income Verification" nature of an FHA Streamline Refinance is in keeping with the FHA's over-riding
philosophy that homeowners making payments at a higher mortgage rate should logically be able to make
payments at a lower mortgage rate.
It's the same for the "no appraisal" requirement. Unlike conforming mortgages that are securitized and sold via
Wall Street, the Federal Housing Authority is the only insurer and guarantor of FHA home loans. Because of
this, the FHA isn't concerned about whether its borrowers' home lose value -- it's on the hook for the loan
either way.
The FHA is more concerned about helping FHA homeowners get payment relief because it knows lower
housing payment makes default less likely in the long-run.
However, getting approved for an FHA Streamline Refinance isn't a rubber stamp. It does come with some
obstacles.
1.Homeowners must be current on their mortgage payments. No 30-day, 60-day, or 90-day delinquencies are
allowed from the last 12 months.
2.Homeowners must have at least 6 months of history paying on their current mortgage. "Instant refis" are not
allowed.
3.The new loan size can't exceed the original size of the FHA loan being replaced
In addition, some lenders -- but not all -- impose minimum credit score requirements.
As of May 2009, the most common minimum credit score for an FHA Streamline Refinance is 620. Not every
lender has this requirement, though. At least one investors through which I lend, for example, allows credit
scores down to 500. Contact me directly if you've been told your FICO is too low for an FHA Streamline
Refinance -- I can help.
And then there's the closing costs.
Every home loan carries fees and FHA Streamline Refinances are no different. There's title charges,
underwriting charges and the other "normal" refinance fees. There's also the FHA's upfront mortgage
insurance premium, paid at every FHA closing. MIP often equals one-and-a-half percent of the loan size and
rolled right into the mortgage.
However, because the size of an FHA Streamline Refinance home loan can't exceed the starting size of the
FHA loan it's replacing, up-front mortgage insurance premiums can sometimes put homeowners in a position
where cash is required at closing. Opting for a "no cost" FHA Streamline Refi can diminish the likelihood of this
occurring, but there's no promise.
Thankfully, the FHA takes a pragmatic approach to upfront MIP.
If you're current FHA mortgage is less than 36 months old, the FHA will refund a portion of your original upfront
mortgage insurance at the time of closing, applying it directly to your settlement statement.
The refund chart is above. Similar to driving a car off the lot, the premium's refund value drops 20% in Month 1
after which it reduces by 2 percent per month until the 10 percent level in reached in Month 36.
A FHA homeowner that paid $3,000 in upfront MIP six months ago, therefore, would be entitled to a $2,100
refund. After 9 months, the refund falls to $1,920.
In three years, the FHA MIP refund falls to $300.
Now, because of how the FHA mortgage insurance refund process is structured, it should be obvious that the
FHA compels its borrowers to refinance into lower rate mortgages as soon as possible. The longer that
homeowners delay on the decision to refinance, after all, the lower their FHA rebate becomes and, therefore,
the higher will be their closing costs.
Again, this approach is consistent with the FHA's goal of getting its homeowners' mortgage payments down
whenever possible. The FHA incents people to "act now" as opposed to trying to wait out the market". ......
| The Home Loan Diva Celia Butler 480-242-9701 Home and commercial lending ~ in all 50 states & Canada celia@homeloandiva.com |