FHA Streamlines are NOT Dead
There is some confusion out there regarding the new guidelines for FHA Streamlines. The new guidelines have been out since November of 2009. We didn’t know how some investors would interpret some of the new guidelines but those concerns are now gone. Some borrowers think they have missed the boat which is not true. Streamlines are still around and interest rates are still at all time lows. The FHA 30 year fixed rate is currently around 5.0%.
There are more changes to the streamline process than listed below but these are the biggest changes that will most likely affect you.
- Net tangible benefit – FHA wants to see that you at least have a 5% reduction in your mortgage payment be refinancing. For example, if your principal and interest is $1,000 per month your new mortgage payment must be at least $950 or less. Pretty simple.
- Verification of Income – The new guidelines require that you are “employed and have an income.” This was one of the grey areas that we did not know how it would be interpreted. All we require at Academy Mortgage is that you are employed though a verbal verification of employment. No paystub or other income verification documents are typically required.
- Maximum Loan Amount – This is probably the biggest change. The new maximum loan amount for a streamline refinance without an appraisal is the current principal balance – UFMIP refund + the new upfront mortgage insurance premium. What this means to the borrower is that they cannot roll any closings or pre-paids/escrows into the loan. Having out of pocket expenses can be tough for some to come up with at closing. Keep in mind, there will not be a mortgage payment due for the month after your closing so this will help offset some of those out of pocket expenses. You will also get a check back from your current lender for your escrow account once they are paid in full. In summary, even though there will be some out of pocket expenses, you can reimburse yourself for those funds.
- No Appraisal required – This is nothing new but I wanted to reiterate that there are still no appraisals required on FHA streamlines. This is one of the biggest benefits of the streamline loan and they did not take this one away.
If you have an FHA loan and currently have an interest over 5.5% it probably makes sense for you to do a streamline. If you have a $300,000 loan and save 1% off your note rate by refinancing you can save over $60,000 in interest!
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