The Federal government has recently changed its guidelines on refinancing.
Homeowners who are “underwater” in regards to value in their homes can now also take advantage some of the lowest rates in 60 years, regardless of your appraised value or loan amount.
The Federal Housing Administration will reduce mortgage fees significantly for borrowers who qualify for the FHA’s streamline refinance program, after June 11, 2012.
Since the financial crisis of 2008, more than 750,000 borrowers have refinanced their mortgages through FHA’s streamline program, according to data from the Department of Housing and Urban Development. More than half of those refinances took place in 2009 after the housing and mortgage markets collapsed.
But rising mortgage insurance premiums on FHA loans have become an obstacle for many homeowners who want to refinance. Depending on the size of the loan, the fees can eat up much of what the borrower would save through the refinance. FHA asserts that lowering the MIP rates for streamline refinances will not incur taxpayer expenses or jeopardize its mutual mortgage insurance fund.
In this streamline program, the FHA asks for limited documentation from borrowers and doesn’t require an appraisal of the home. The no-appraisal rule allows owners to refinance even if they owe more on their mortgages than their houses are worth.
The lower fees go into effect June 11 and will be available to borrowers who refinance loans that were endorsed by the FHA before June 2009. FHA estimates that there are approximately 3.4 million households with qualifying FHA mortgage loans with mortgage rates over 5 percent.
The average household could save about $250 per month or $3000 annually using streamline refinancing.
Acting FHA commissioner Carol Galante remarked that lowering the insurance premium rates for streamlining FHA mortgages “is one way that FHA can help homeowners who are doing the right thing, paying their bills on time and who want to take advantage of today’s low interest rates.”
The program is providing an inexpensive method of refinancing, which can prevent foreclosures and provide homeowners with additional cash for paying bills and meeting essential household expenses.
The FHA Streamline Refinance is a unique mortgage product, available to homeowners with existing FHA home loans only. The program was built to be the fastest, simplest way for an FHA-insured homeowners to refinance their respective mortgages. The FHA Streamline Refinance’s big attraction is the leniency of its underwriting standards.
But In Order to Qualify, You Must Meet This Criteria…
Your current FHA mortgage must have been assigned before May, 2009
You must be current on your mortgage and not been late over the last 12 months consecutive.
If you meet these two criteria, you may be FHA Streamline-eligible and below are a few other items to consider,
If you had a bankruptcy, you are most likely eligible, but please call expert Loan officers and other mortgage professionals for more information about your particular situation.
There are many options available, including a “no-closing cost” option where you won’t have to come out of pocket for the refinance.
And remember: you may “not” need an appraisal to qualify.
The Federal Housing Administration will reduce mortgage fees significantly for borrowers who qualify for the FHA’s streamline refinance program. Again, the lower fees go into effect June 11 and will be available to borrowers who refinance loans that were endorsed by the FHA before June 2009.
The new, lower fees will make streamline refinances much more feasible to borrowers, as some estimates when the new fees take effect will be, a borrower refinancing $200,000 will pay $20 — instead of $3,500 — in upfront mortgage insurance. The borrower also will pay about $92 — instead of $208 — per month for annual mortgage insurance.
That’s because the FHA reduced the upfront mortgage insurance premium for eligible homeowners to 0.01 percent of the total loan and the annual premium to 0.55 percent of the loan.
In comparison the borrowers who are “not eligible” for the reduced fees under the streamline program, the cost of upfront mortgage insurance is 1.75 percent of the total loan and 1.25 percent of the loan per year.
Loan officers and other mortgage professionals say they have lists of clients who are waiting to refinance in June with the lower fees which could create a mini-refinance boom in June after the fees are reduced.
Remember that “No appraisal required”, except some lenders have overlays, if you are going from a 30-year to a (15-year mortgage) and your payment is not decreasing, or if you are removing one person off the title,” you’ll need an appraisal
As long as your mortgage payments decrease by at least 5 percent with the refinance, the lender does not have to order an appraisal of your home.
These guidelines are to help homeowners who are upside down on their mortgages.
Generally, lenders want a FICO score of 640 or higher for streamline refinances, Some lenders are willing to accept 620 and a few will go lower than that, but they usually charge higher rates on loans with lower scores.The FHA does not require a minimum credit score for streamline refinances, but the lender that is refinancing your mortgage will likely have its own requirements, as an additional “overlay”
With the streamline program, the FHA allows borrowers to refinance without having to show proof of employment and income. Although some states have laws that require lenders to verify borrowers’ income on all mortgages regardless of what the federal program allows. And in some cases you will likely be asked to present documentation that shows you can afford the mortgage payments.
In the last few years Lenders have been reluctant to underwrite mortgages without asking for full documentation and minimum credit scores, especially when many of the mortgages they are being asked to refinance have lower values and are underwater.
So these new guidlines should encourage lenders to embrace streamline refinances, since the government has changed the way it evaluates lenders’ FHA loan portfolios. The FHA has a scoring system based on the performance of each lender’s FHA loans. If a particular lender has too many delinquent loans compared to other lenders, the FHA may stop doing business with that lender.
Historically, the FHA Streamline Refinance has been an excellent program with lots of success stories and it remains the fastest, easiest refinance loan program in the country.
The FHA will start accepting these new streamline loans after June 11, 2012 but borrowers can begin the application process now in anticipation of the new program.
Everyone needs to be sure to find the ethical honest “Real Estate Industry Professionals” willing to assist the “American Homeowners” who are “underwater” in regards to value in their home, be sure to educate yourself, and beware of the mortgage fraudsters. Mortgage fraud is a material misstatement, misrepresentation, or omission relied on by an underwriter or lender to refinance, fund, purchase, or insure a loan.
If you have questions or need to know if you are dealing with a ethical or reputable lender, send an e-mail and I will attempt to assist you in the order the e-mails are received.
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