What would you do with an extra $372?

Money in pocket$372 is the average monthly savings that my clients who have closed on their refi’s so far in March. With higher appraised values, thanks to the hot real estate market driving up home prices, many clients are also eliminating mortgage insurance with their refi.

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HUD’s Net Tangible Benefit Requirement is Hampering FHA Streamline Refinances

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.

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You Don’t Have to Wait Until June to Start Your FHA Streamlined Refi

If you currently have an FHA insured mortgage that was *guaranteed* prior to June 1, 2009, you may qualify for significantly reduced mortgage insurance premiums with an FHA streamlined refinance.  Effective June 11, 2012, HUD will offer the reduced premiums for those who meet HUD’s criteria. The good news is, if you qualify for the reduced premiums, you don’t have to wait to lock in today’s low rates – just do a longer lock!

Why HUD, in all their wisdom, used the date an FHA loan was guaranteed beats the heck out of me. This has nothing to do with when your FHA mortgage closed; it’s when HUD has insured the loan which often takes place weeks or even a few months after closing.

If you have been considering refinancing your FHA mortgage with an FHA streamlined refi, and you closed on your last FHA mortgage prior to June 1, 2009, you may want to check with a local lender to see when your current mortgage was endorsed.

If you’re one of the lucky ones, you can actually start your application now (click here to apply on line if your home is located in Washington) and wait until June 11, 2012 to order your FHA case number.  We can also watch rates to determine when to lock. The longer the lock period, the more the rate cost. You can see by the rates posted below –  locking now with an extended lock period looks pretty good!

NOTE: Rates quoted below are from April 2012 – for your current mortgage rate quote on Washington homes, click here.

Here’s are some scenario’s for FHA streamlined refinances based on rates as of the writing of the post (4/11/2012 12:45pm PST) and the borrower having mid-credit scores of 720 or higher in greater Seattle:

Base loan amount of $400,000 for a 30 year fixed rate mortgage:

FHA Streamlined Refi with existing mortgage NOT qualifying for the reduced mortgage insurance premiums (mortgage not guaranteed by May 31, 2009 or sooner by HUD):

3.750% (apr 4.743%) with a PIMI (principal, interest and mortgage insurance) payment of $2,298.06. 

FHA Streamlined refi (existing mortgage was guaranteed by HUD prior to June 1, 2009) with closing by June 18, 2012 (long enough time period to obtain the reduced mortgage insurance premiums):

3.750% (apr 4.141) PIMI payment of $2,034.45. You don’t have to wait to lock in today’s low rates!  This pricing is based on a 75 day lock – or you can start the process and lock in at anytime you choose as long as the lock period is beyond June 11, 2012.

This is especially huge for FHA Jumbo’s which are really being hit hard with the higher FHA mortgage insurance premiums. In the greater Seattle area, this impacts FHA loans with a base loan amount of $417,001 to $567,500.

Here’s how the payments compare for an FHA Jumbo with a base loan amount of $565,000 and 720 mid-credit scores: 

FHA Jumbo Streamlined refi where existing mortgage was guaranteed June 1, 2009 or later:

3.750% (apr 4.589) with a PIMI payment of $3,222.66.

NOTE: FHA annual mortgage insurance will increase again for high balance/jumbo FHA loans by an additional 0.25% effective June 11, 2012. This increase would cause our above scenario (if they waited until June 11, 2012 to get their case number) to have a PIMI of $3,339.38 (apr 4.732). If you fall into this category: FHA high balance (aka jumbo) guaranteed after May 31, 2009, you will want to obtain your FHA case number BEFORE June 11, 2012.

FHA Jumbo Streamlined refinance where the existing FHA mortgage was guaranteed May 31, 2009 or sooner priced with a 75 day lock to close after the FHA case number is obtained on June 11, 2012:

3.875% (apr 4.214) with a PIMI payment of 2,913.94.

Another reason to consider starting your application now is that it will allow you have time to review your credit. There may be small adjustments you can make that will improve your credit score and quite possibly your interest rate – the point is, you have some time to check it out and make sure you’re in the best position prior to closing. 

If your home is located anywhere in Washington state, and you’re considering an FHA streamlined (or any type of) refi, I’m happy to help you! 

You don’t have to wait to start your FHA streamlined refi and gamble rates going higher, unless you want to.