It's an interesting time for FHA-insured homeowners.
FHA mortgage rates are making new, all-time lows while -- at the same time -- FHA mortgage insurance premiums (MIP) are gearing up for an increase. The combination has fueled a spike in FHA refinance applications nationwide.
The FHA Streamline Refinance is a special refinance product reserved for homeowners with existing FHA mortgages. It's a verification-less, appraisal-free refinance meant to help FHA-insured homeowners lower their monthly payments.
A specific savings amount is required.
In its official program guidelines, the FHA states that homeowners may not use the FHA Streamline Refinance unless their respective monthly mortgage payments are reduced by five percent or more. "Monthly mortgage payment" is defined as the principal + interest due, plus the accompanying monthly MIP.
This rule is known as the Net Tangible Benefit clause and, when combined with the FHA Streamline Refinance rule against adding closing costs to the loan size, guarantees that each FHA Streamline Refinance has value to the homeowner in the near-term and the long-term.
It's one reason why zero-closing cost FHA Streamline Refinances are so popular -- few homeowners want to bring that kind of cash to their closing. Especially those in high closing cost states such as New York, Texas and Pennsylvania.
The FHA Streamline Refinance guidelines are straight-forward and plain. The FHA wants lenders to confirm just a bit, gloss past a lot, and make certain that the refinance has a bona fide benefit in the form of lower monthly payment.
Lenders following the FHA's official published loan guidelines look for three things, and three things only. You must be able to answer "Yes" to the following :
Beyond that, nothing. No appraisals are required, no credit scores are checked, and it's okay to be unemployed. The FHA ignores these things because they don't matter.
So long as you've been paying as agreed on your mortgage and so long as your mortgage payment is shrinking, the FHA wants to see that you can refinance.
For homeowners with existing FHA home loans, the timing is right to refinance via the FHA Streamline Refinance. Falling mortgage rates have made for good payment savings, but beginning June 3, 2013, FHA mortgage insurance premium schedules change. This may add long-term costs for those who choose to wait.
Homeowners with 30-year fixed rate FHA rates over 4% should consider a refinance. Get started with a rate quote online.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.