FHA Streamlined Refinance: Credit vs Non-Credit Qualifying

July 25, 2012 by 10 Comments

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.

EDITORS NOTE: Rates quoted below are expired (years old!!)…for a current mortgage rate quote for your home in Washington state, click here.

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.

Filed Under: FHA, Refinance Tagged With: , , , , , ,

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

July 6, 2012 by 18 Comments

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!

Filed Under: FHA, Refinance Tagged With: , ,

Has your Bank turned down your refi?

July 5, 2012 by 1 Comment

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. 

Filed Under: FHA, HARP - Home Affordable Refi, Refinance Tagged With: , , ,

HUD rescinds recent guidelines on collections and disputed accounts

June 19, 2012 by Leave a Comment

Earlier this year, HUD released Mortgagee Letter 2012-3 which featured tougher underwriting guidelines. This week they released ML 2012-10 which effective immediately recinds the guidelines that would impact:

  • paying off collections and judgements; and
  • disputed accounts

All other guidelines address in ML 2012-3, including those that address income of self employed borrowers, are still going into effect.

Per ML 2012-3, the old guidance (which is now the “effective” guidance per ML 2012-10) does not automatically require collections to be paid off however judgements do need to be satisfied and paid off.  Disputed accounts are to be referred to underwriting (and most likely will need to be removed from the credit report).

Again, we’ll need to see how banks and lenders treat this rescission of guidelines or if they opt to stick with the tougher requirements by creating their own underwriting overlays.

Filed Under: FHA, Underwriting and Qualifying

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

June 18, 2012 by 3 Comments

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.

Filed Under: FHA, Refinance Tagged With:

FHA Streamlined Refi Revamped and Revisited

June 14, 2012 by Leave a Comment

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.

Filed Under: FHA, Investment Property, Refinance Tagged With: , , , , , ,

Just one more week for higher and lower FHA mortgage insurance premiums

June 4, 2012 by Leave a Comment

A week from today, on June 11, 2012, HUD has more changes scheduled for FHA mortgage insurance premiums. I've been sharing this news with you here on my blog.

Let's start with the higher premiums. If you are considering an FHA high balance (also known as an FHA jumbo) mortgage, if possible, you want to obtain your FHA case number as soon as possible.  Starting next week, effective on case numbers obtained on or after June 11, 2012, FHA annual mortgage insurance premiums for high balance loans will go up an additional 0.25%.  FHA annual mortgage insurance is paid monthly.

In the greater Seattle area, this will impact FHA loans from $417,001 to $567,500.

I have more about the increase to the FHA mortgage insurance premiums on this earlier post.

If you are buying a home with utilizing an FHA insured mortgage – make sure you get your case number pronto.  This also implies to you if you're doing a rate-term FHA refinance (not an FHA streamline) or an FHA streamline refinance that was endorsed after June 1, 2009.  

This is a good segue to the reduced premiums that take effect next week…

HUD has dramatically reduced FHA mortgage insurance premiums on loans that were endorsed prior to June 1, 2009.  An FHA mortgage is "endorsed" after closing – sometimes many weeks after.  It's possible your FHA mortgage closed in May 2009 and was not endorsed until after June 1, 2009, in which case, your loan would not qualify for the reduced mortgage insurance premiums.

If your FHA mortgage was endorsed prior to June 1, 2009, your eligible for greatly reduced MI rates.  HUD has reduced the upfront mortgage insurance premium to 0.01% and the annual mortgage insurance premium to 0.55%.  It's a significant savings, especially when you factor in today's extremely low mortgage rates.  

The reduced FHA mortgage insurance premiums are available for FHA streamlined refinances with case numbers obtained on or after June 11, 2012.  Guess what?  You do not need to wait until June 11, 2012 to start your FHA streamlined refinance.  We are accepting mortgage applications now for FHA streamlined refinances as long as your home is located in Washington state.  FHA streamlined refinances do not require an appraisal so it's okay if your home has lost value.

I have been originating FHA loans since April 2000 at Mortgage Master Service Corporation. If your home is located in Washington State, I'm happy to help you with your mortgage. Click here if you would like me to provide you with a mortgage rate quote for your Washington home.

Filed Under: FHA, Mortgage Insurance

Don’t Delay: FHA Mortgage Insurance set to increase (again) for FHA Jumbos on June 11, 2012

May 15, 2012 by Leave a Comment

Last month, HUD increased FHA mortgage insurance rates on both upfront and annual (paid monthly) premiums. Borrowers who are considering an FHA high balance (aka FHA jumbo) loan amount, will see another increase to FHA mortgage insurance next month.

Effective on case numbers issued on or after June 11, 2012, FHA annual mortgage insurance premiums for "high balance" FHA loan amounts by 0.25 bps. In the greater Seattle area (King, Snohomish and Pierce counties), this impacts loan amounts between $417,001 to $567,500 for 1-unit properties.

Currently, FHA high balance mortgages have annual insurance premiums per the table below.

FHAAnnualMIP
Effective with FHA case numbers issued June 11, 2012 and later, the annual mortgage insurance premium for FHA jumbos will look like this:

Term greater than 15 years

  • LTV equal or less than 95% = 145 bps
  • LTV greater than 95% = 150 bps

Term 15 years or less with LTV above 78%

  • LTV equal or less than 90% = 60 bps
  • LTV greater than 90% = 85 bps

FHA annual mortgage insurance is paid monthly. To determine how much the annual mortgage insurance will impact your monthly mortgage payment, multiply the base loan amount by the bps. 

Today, a Seattle home with a 95% LTV and an FHA Jumbo 30 year fixed with a base loan amount of $560,000 would have an a monthly mortgage insurance of $583.00 (560,000 x 1.25% = 7,000 divided by 12 months = 583.33).

With FHA Case numbers issued as of June 11, 2012 or later, the same Seattle home will have a $116.67 higher monthly mortgage premium.  (560,000 x 1.50% = 8,400 divided by 12 months = $700.00 per month).

If you are considering an FHA Streamline refi in the greater Seattle area (King, Pierce or Snohomish counties) and your loan amount is $417,001 to $567,500 and you obtained your FHA loan after May 2009, you may want to start your refi now! NOTE: If your existing FHA mortgage was endorsed by HUD prior to June 1, 2009, you qualify for reduced FHA mortgage insurance premiums. If you would like a rate quote, click here.

If you are considering buying a home or are in contract to buy a home and you have an FHA jumbo, make sure your mortgage professional obtains your FHA case number prior to June 11, 2012.

I'm happy to help you with your FHA mortgage if your home is located any where in the state Washington. 

Filed Under: FHA
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