FHA Streamlined Refi for your Investment Property

Did you know that if your existing mortgage is FHA on your investment property, that it may qualify for an FHA streamlined refi?

Here’s the scoop for a non-owner occupied FHA streamlined refi:

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FHA Streamlined Refinance: Credit vs Non-Credit Qualifying

With an FHA streamlined refi, most folks have the misconception due to the program name “streamlined” that the refinances are close very quickly and are a slam dunk with little to no paperwork. While they do close quicker than a typical refinance since more often than not, you’re not waiting on an appraisal, if you’re going for a lower cost or better rate, you’re probably opting for a “credit qualifying” FHA streamlined refi. What’s the difference?

FHA streamlined credit qualifying basically means that the borrower is providing income and asset documents, just like a regular refinance. By providing documentation that shows they actually qualify for the new mortgage, lenders provide preferred pricing. Since it is a “manual” underwrite (a real human is underwriting the loan and not a computer program) the debt to income ratio is limited to 45%.

FHA streamlined non-credit qualifying is when income documentation is not provided and not stated on the loan application. The borrower’s income is not a consideration. Because of the higher risk, the rate or pricing is often slightly higher.

Right now (July 25, 2012 at 11:00 am) I’m working on a quote for an FHA streamlined refinance for a home located in Seattle. The rates quoted below are based on mid credit scores of 680 –  720 with no appraisal and the base loan amount is $289,000.

FHA credit qualifying 30 year fixed: 3.375% (apr 4.548) priced with just over 1 point in rebate credit which will cover closing cost and some of the prepaids/reserves. Principal and interest payment is $1300.01.

FHA non-credit qualifying 30 year fixed: 3.750% (apr 4.934) priced just under 1 point (about 0.25% difference in fee) which covers closing cost and some of the prepaids/reserves. Principal and interest payment is $1361.82.

NOTE: for a current rate quote on a home located anywhere in Washington state, based on today’s pricing and your scenario, click here.

What type of supporting documentation is required?  This is in additional to a complete loan application and credit report.

Non-credit qualifying:

  • Copy of your existing mortgage Note
  • Copy of your mortgage statement (we need to document a “Net Tangible Benefit”)
  • Bank statement (all pages) if funds are due at closing. Large deposits may be required to be documented.
  • Drivers license
  • Social security card
  • Payoff obtained from escrow company documenting that the current month’s mortgage payment has been made

Credit qualifying: all the above, plus…

  • last two years W2s
  • last two years tax returns (if self employed)
  • most recent paystubs documenting 30 days of income
  • most recent bank statements (all pages) documenting at least funds for closing. Large deposits may be required to be documented.

Additional documentation may be required depending on your personal scenario.

Whether you opt for non-credit qualifying or credit qualifying is your choice and depends on your financial scenario. When rates and pricing are the same for both scenarios, most would opt for “non-credit” qualifying. Since recent changes with how HUD prices FHA mortgage insurance for some loans, there has been major changes with which banks are offering FHA streamlines and how they’re pricing them.

If I can help you refinance your FHA loan on your home located anywhere in Washington state, please contact me.

Should I do an FHA streamline refi if my rate is 4.875%?

This is a scenario I’m reviewing for one of my clients who lives in Seattle.  His existing mortgage is a 30 year fixed FHA at 4.875%. He closed on this loan after June 1, 2009 so it does not qualify for FHA’s reduced mortgage insurance premiums*. However, he can still take advantage of today’s low mortgage rates as long as the refi meets HUD’s “net tangible benefit” requirements of reducing his payment by at least 5%.

HUD’s Net Tangible Benefit requires that the “PIMI” (principal, interest and mortgage insurance) payment be reduced by at least five percent or the refinance cannot happen. This has been an issue for home owners who would like to refinance from their FHA 30 year fixed to an FHA 15 year fixed as HUD does not make an exception for those who would like to shorten their mortgage term if the payment increases — even if the borrower qualifies with documenting their income (some FHA streamlines do not require income to be documented). 

The Seattle client I’m working with is doing a “credit qualifying” FHA streamline refi for a 30 year fixed.  His current principal and interest is $1171.55 and the monthly mortgage insurance payment is $95.90 for a total PIMI payment of $1,267.45.  His new PIMI payment needs to be less by at least 5% ($63.37) which means his new PIMI needs to be $1,204.08 or lower.

As of 10:00 am this morning (July 6, 2012) I’m quoting 3.375% for a 30 year fixed FHA streamline refi with no appraisal (apr 4.554) with a base loan amount of $212,750.  After his upfront mortgage insruance premium credit from his existing FHA insured loan and interest rate credit, he’ll need to bring in about $1200 at closing. He won’t have a mortgage payment due until a month after closing and receiving a refund of his existing reserve account balance a couple weeks after closing.  

But what about the new PIMI?  Principal and interest is $957.01 and the monthly mortgage insurance is $210.85 for a total PIMI of $1,167.86.  The new refinance meets HUD’s net tangible benefit requirement.  

The Seattle homeowner is reducing their payment by $100 per month. **And after 60 payments and when the loan balance reaches 78% loan to value, the monthly mortgage insurance will terminate.  

**UPDATE 12/19/2012: FHA mortgage insurance will not be cancelled on new mortgages effective January 2013. It will remain on the life of the loan (until it is paid off or refinanced to a non-FHA mortgage).** Read more here.

*NOTE: If the FHA mortgage being refi’d was endorsed by HUD prior to June 1, 2009, the savings would be even greater as it would qualify for reduced mortgage insurance.

If you have an FHA insured mortgage and are interested in an FHA streamlined refinance on your home located anywhere in Washington, please contact me.  I’m happy to help you!

Has your Bank turned down your refi?

IStock_000014142621XSmallIn a time when one might assume that their bank would work with them to refinance their home, many Washington homeowners are finding quite the opposite. I’m hearing from local homeowners who have made their mortgage payments on time and who qualify for refinance (income, employment and assets) yet their bank is either unwilling to provide the refinance or is taking several months to close it.

For example, several large banks will only do FHA streamline refinances on mortgages they currently service.  You can have your checking and savings accounts any of these banks, but if they don’t currently service your mortgage, it’s my understanding they will not assist you with your FHA streamlined refinance.  NOTE: We can help you refinancing your FHA streamlined mortgage from any bank as long as your home is located in Washington.  

Banks are also being very selective when it comes to HARP 2.0 (home affordable) refinances. Some are electing not to help mortgages they currently service because of lpmi (lender paid mortgage insurance) or pmi when many of these loans are eligible to refinance. 

Bottom line, if your bank or mortgage servicer has turned down your refinance (or if they’re stalling the process) and your credit, income and assets are good: get a second opinion.  

If your home is located anywhere in Washington state, I’m happy to review your scenario. I’ve been originating and closing refinance and purchase mortgages at Mortgage Master Service Corporation since April 2000. 

Banks playing hardball with FHA Streamline Refi’s: ACT NOW!!

No sooner had the reduced MI gone into effect with FHA streamline refinances, some banks announced that they would only provide FHA streamline refinances on mortgages they currently service.  I can understand a bank doing this on the “non-credit qualifying” refinances where borrowers do not document their income or assets, however I have a hard time accepting this when a borrower is doing a full “credit qualifying” FHA streamlined refinance.

By limiting availability of a program to home owners who are ABLE AND WANT to continue to make their mortgage payments and take advantage of the historically low mortgage rates, these banks are hampering the recovery of our housing markets.

Wells Fargo, with a significant market-share of FHA insured loans, was the first bank to come out with this announcement. If you have an FHA mortgage with Wells Fargo, I can help still you with your refinance if your home is located in Washington. I just have to keep your new FHA loan with Wells Fargo. Other banks have followed suit with a few giving us deadlines of up to this Friday, June 22, 2012 for accepting FHA streamline loans they do not service.  

UPDATE: Received a notice of one bank adding a price hit for FHA streamlined refinances… somehow I don’t think HUD invisioned banks cherry picking and charging more for this program when HUD reduced the mortgage insurance premiums.

I continue to get announcements from the various banks and lenders we work with. Thankfully not all banks are following Wells Fargo’s suit.

BOTTOM LINE: if you have an FHA mortgage and are interested in an FHA streamlined refinance, please don’t delay! Banks are making them less available.

If your home is located anywhere in Washington state, I can help you with your FHA insured loan.  We are *currently* working with lenders who will accept FHA loans currently being serviced from other banks.  Click here to apply.

FHA Streamlined Refi Revamped and Revisited

There is a lot of interest in the FHA streamlined refinance since HUD has greatly reduced the mortgage insurance premiums for some home owners who originated their existing FHA mortgage May 2009 and earlier. FHA streamlined refinances are designed to reduce mortgage payments and borrowers are not allowed to take “cash out” or pay off existing helocs or second mortgages. In order to qualify for an FHA streamlined refiance, the borrower must have made at least six payments on the FHA loan and needs to be current with the mortgage.  Here are a few tips on FHA streamlined refinances I thought I’d share with you.

No appraisal required. If you opt to not have an appraisal, then your new loan amount may not exceed your current loan amount. This means that your closing cost and prepaids/reserves cannot be financed (upfront mortgage insurance is still allowed to be rolled into the loan). Closing cost and prepaids/reserves may be paid for with interest rate rebate credit or cash at closing.  If you opt to have an appraisal, then your loan amount may be increased.

Credit qualifying vs non credit qualifying.  FHA streamline refi’s may not require verification of your income or assets (non-credit qualifying). Did you know that you may qualify for improved pricing if you opt for a credit qualifying FHA streamlined refi? Pricing varies throughout the day and when I’m locking an FHA streamlined refi for a Washington area homeowner, if pricing is the same, I’ll opt for non-credit qualifying. However if pricing is improved for a credit qualifying streamlined refinance, I’ll advise my client of the pricing differences and let them decide which route they prefer.

Underwriting overlays. Although HUDs guidelines might state something different, the banks and lenders we work with allow us to help home owners who have a low-mid credit score of 640 or higher. If your credit score is below 640, you may want to consider working directly with your bank.

Net tangible benefit. HUD requires that the loan “makes sense” and that is defined as a reduction in your mortgage payment (principal, interest and mortgage insurance) of at least 5%. It may also mean refinancing your FHA ARM into an FHA fixed rate product. Unfortunately, if you’re refinancing an FHA 30 year to a FHA 15 year fixed rate product, and your payment does not go down by 5%, you will not meet the current “net tangible benefit” requirement – even if you’re doing a “credit qualifying” FHA streamlined refinance and fully disclosing your income. This is something HUD needs to correct, in my opinion.

Reduced mortgage insurance premiums. HUD has announced reduced mortgage insurance premiums (both annual and upfront) for FHA loans that were endorsed (insured) by HUD prior to June 1, 2009.  FHA loans are endorsed by HUD after closing – sometimes several weeks after closing so it’s possible your FHA mortgage closed in May of 2009 and not endorsed until after the cut-off date.

Credit of your existing upfront mortgage insurance premium (UFMIP). If your existing FHA insured mortgage was originated over the past three years, it may not quaify for qualify for the reduced mortgage insurance, however, you probably will receive a refund of a portion of the original UFMIP. The refund is credited towards the closing cost of your new FHA loan and ranges from 80% to 10% of the original UFMIP by the 36th month.

FHA streamlined refinances are available for non-owner occupied homes too! If you have a home that has been converted to a rental property and the underlying mortgage is FHA, it’s eligible for an FHA streamlined refinance as long as the owner occupied it for a least 12 months.  With a non-onwer occupied FHA streamlined refinance, it must be done without an appriasal so no closing cost may be financed (except the upfront MIP).

If you are interested in refinancing your existing FHA insured mortgage on a home located anywhere in Washington, I’m happy to help you. I’ve been originating FHA home loans at Mortgage Master Service Corporation since April 2000, where we have in house FHA underwriters at our main office in King County.  Click here for your FHA rate quote.

FHA to Reduce Mortgage Insurance Rates for some FHA Streamlined Refi’s

Today HUD announced that beginning June 11, 2012, FHA will REDUCE the cost for an FHA streamlined refinance for FHA insured mortgages that were originated prior to June 1, 2009. A mortgagee letter will follow to make the following changes official:

Upfront mortgage insurance (UFMIP) will be reduced to 0.01% (from 1.00%).

Annual mortgage insurance (typically paid monthly) will be reduced to 0.55% (cut in half from 1.10%).

This is great news to those who originated their FHA loans prior to June 1, 2009. Once I receive the mortgagee letter from HUD, I'll be sure to update you.  We'll need clarification on how HUD defines "origination".  UPDATE:  FHA's Mortgagee Letter clarifies that loans must be "endorsed" by HUD prior to June 1, 2009.  This is different than your closing date and typically takes place weeks after closing.

FHA streamlined mortgages are popular right now considering today's low mortgage rates and that they do not require an appraisal. 

Currently, a Seattle area home owner doing an FHA streamlined refinance with a loan amount of $400,000 and credit scores of 720 or higher would have a rate of 3.750% (apr 4.449) with a principal, interest and mortgage insurance (PIMI) payment of $2,234.59.  With the proposed reduced FHA mortgage insurance, assuming the home owner originated their FHA loan prior to June 1, 2009, their PIMI payment would be $2,034.45 (apr 4.071): a difference of $200 per month!

If you would like more information about refinancing your FHA insured mortgage for your home located anywhere in Washington, please contact me.  I have been originating FHA insured mortgages for Washington home owners since April 2000 at Mortgage Master Service Corporation and I'm happy to help you.

UPDATE 3/6/2012: INFORMATION ON HUD'S MORTGAGEE LETTER. 

FHA Streamline Refi’s with No Appraisal

When HUD changed the guidelines for FHA streamlines last fall,I thought they had pretty much stuck a fork in a program that has been very beneficial to home owners who have an FHA insured mortgage loan.  You see, HUD made it to where if a borrower opted to not have an appraisal, they cannot finance their closing cost or reserves/prepaids.  Back then I never thought we would see rates at their current levels.  With today's rates, many home owners can opt for a slightly higher than "par" rate to have the lender pay for a portion of their closing costs.   In addition, it doesn't matter what your home's current appraised value is since there is no appraisal!

With an FHA streamline refi, if the loan has less than 36 payments, there may be a credit of the balance of the upfront mortgage insurance premium if it was financed (99% of loans have the ufmip financed).  The credit is on a sliding scale (the earlier in the loan, the larger the credit). 

Closing costs are reduced since there's no appraisal fee (and no worry about what your home may appraise for).  The loan amount is limited to the current principal balance plus the new upfront mortgage insurance premium.   With today's pricing, many Seattle area home owners are typically bringing in the mortgage payment they would have "skipped" or funds to start their reserve account at closing and enjoying the benefit of a much lower payment due tot he reduced rate.   Borrowers will receive a refund of the balance of their reserve account a few weeks after closing from their existing mortgage servicer.

FHA mortgage insurance premiums are set to change in weeks (October 4, 2010).  Although the upfront premium is decreasing, the annual (monthly) is increasing and the net effect is more expensive that the current formula.

At Mortgage Master Service Corporation, we are a HUD Endorsed Lender with our own in-house FHA underwriters.   I've been originating FHA loans for over 10 years and I'm happy to provide you a free rate quote for your home located in Washington state.

UPDATE:  In order to qualify for an FHA streamline refinance, the borrower must:

  • have an FHA insured mortgage
  • have made a mimium 6 mortgage payments (seasoning) by the time they apply
  • have a minimum mid-credit score of 620 640 (or higher)
  • document income and employment
  • document assets needed for closing
  • Last but not least, the proposed refinance must create a "net-tangible" benefit to the borrower.