HUD has a requirement that in order for a borrower to do a streamline refinance their existing FHA mortgage, their scenario must have a “net tangible benefit”. FHA streamline refinances are popular today because they do not require an appraisal and FHA mortgage rates are very low.
Mortgage Programs
Not all mortgage loans are the same — and choosing the right program can make a significant difference in your payment, qualification, and long-term financial flexibility.
This section covers the most common and specialty mortgage programs available to homebuyers and homeowners, including:
- FHA Loans
- VA Loans
- USDA Loans
- Conventional & Jumbo Loans
- HomeReady & Home Possible
- Down payment assistance programs
- Washington State Housing Finance Commission (WSHFC) programs
- Specialty programs for medical professionals and unique scenarios
Understanding eligibility guidelines, loan limits, credit requirements, and program benefits allows you to compare options strategically rather than relying on headlines or general advice.
As a Mortgage Advisor with over 25 years of experience, I help clients evaluate which program best aligns with their income, assets, and long-term plans.
Explore the programs below to better understand your options.
HUD’s Net Tangible Benefit Requirement is Hampering FHA Streamline Refinances
November 18, 2012 by 1 Comment
The Family Opportunity Mortgage Refinance
August 14, 2012 by 17 Comments
Cheerful woman with family standing in back yard
I’ve written about the Family Opportunity Mortgage for purchases where certain circumstances allow one to obtain a mortgage for a family member who is either a student in college, a disabled adult child or an elderly parent. The Family Opportunity Mortgages allows financing to be treated as a primary residence instead of an investment property as long as the scenario meets certain guidelines. The Family Opportunity Mortgage is a Fannie Mae/Freddie Mac program that is also available for refi’s! [Read more…]
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.
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!
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.
