Guest Post by Optimal Loans Oakland, CA An FHA Streamline is a special loan product for individuals that have an existing FHA mortgage. It is a very easy and pain free process that does not require a Home appraisal and income verification. One of the perks of not having an appraisal is that you can refinance your loan even if your loan amount is higher than the value of the property. Also you don’t have to worry about paying for an appraisal. The FHA encourages folks that are underwater to refinance their property and lower their monthly payment. This is a great time to take advantage of this opportunity because the requirements to qualify are very lenient and simple. And most importantly the interest rates are the lowest they have been in the last 2 years. Also the MIP has been reduced dramatically. The reduction amount is dependent on your loan amount and amortization. Please refer to the MIP Chart towards the bottom of this article to understand this better.
Requirements of the FHA streamline program:
We wanted to dig in deeper to help you understand what lenders actually require from you to get this deal done. Income verification is not required in an FHA loan. When applying for a Streamline loan you do not need to provide W2, 1099 or Tax returns. Lot of articles online state that no job verification is required. However most lenders will do a Verification of Employment before the loan funds. This is merely a call to your employer to ensure that you have a job.
Mortgage only Credit Report
In an FHA streamline loan the lenders do not require a credit report but they require a Mortgage Only Tri-merged Credit report. They want to verify if you have had any late payments in the previous year. You are only allowed to have one late payment on your mortgage in the last 12 months. Also most lenders require a minimum credit score of 620 on Conforming FHA loans and 640 on Jumbo FHA loans.
In order to qualify for this mortgage there must be a 5% reduction in P&I and MI. FHA streamline loans do not allow lender cashback and all credit from the lender will be applied to the reduction of the principal balance. Streamline loans are only for owner occupied properties. The borrower must have made at least 6 payments on the FHA mortgage that is being refinanced to qualify for a Streamline Refinance. At least 210 days must have passed on the FHA mortgage before it can be considered. You may not increase loan balance to cover for loan closing costs. The borrower must pay for closing costs out of pocket or cover them with lender credit. The closing costs consist of lender origination charges and title/escrow charges. This is not something that should worry you given today’s lending market. Most lenders are giving plenty of credit on interest rates that cover for your closing costs. It is very common to find a zero cost streamline loan or a loan that requires very low closing costs.
Upfront Mortgage Insurance Premiums
All loans that were endorsed by the FHA on or after June 1st, 2009 will have an Upfront Charge of 1.75% of the loan amount. This will be added to your loan balance. For example if the loan amount you are applying for is $200,000 then your upfront will be $3500. UFMIP formula = 1.75% X Current Loan amount. If you are refinancing within 3 years of your initial loan, FHA will provide a refund on previously paid upfront MIP. The size of the refund decreases as your 3 year time frame diminishes. Contact your Loan officer to get an exact figure of how much your refund will be.
Now that we have discussed the requirements. Let’s tell you why you should apply for a FHA Streamline Refinance. -First and most importantly the Annual MIP has decreased on January 26th, 2015. Even if you have a great Interest Rate you can save a lot on the MIP itself. Refer to the charts and example below.
Term > 15 years
|Base Loan Amount||LTV||Previous MIP||New MIP|
|< $625,500||< 95.00%||130bps||80bps|
|< $625,500||> 95.00%||135bps||85bps|
|Terms < 15 Years|
|Base Loan Amount||LTV||Previous MIP||New MIP|
For example: If your FHA loan amount is $525,000 and your MIP is at 130bps. You are paying $568.75 in Monthly MIP. Now, if you were to refinance with the Streamline program you can decrease your MIP from 130bps to 80bps. So your new monthly MIP will be $350. That is a $218.75 saving on your monthly payment. And you can do this without an appraisal!!
- Very little paperwork required for a streamline. Which means very little time and effort required to get the deal done.
- You can lock in a great interest rate in today’s Market. Ask your loan officer for a rate quote!
- It is very common to find a loan that will cost you close to nothing as lenders are offering credit on interest rates. This depends on what rate you chose. Ask your Loan Officer about this.
In general this is a great time to refinance any Home mortgage given the current interest rate market. But if you are on the Streamline path it is the best time. You may be wondering why the FHA is allowing such a great loan program. Well, by allowing borrowers to lower their mortgage payments they reduce the risk of defaults on FHA mortgages. As the FHA insures these mortgages made by lenders it is the FHA’s goal to reduce risk on its overall portfolio. If you have a FHA Mortgage then don’t wait because it is a guaranteed saving and practically very minimal effort from your end. Optimal Loans www.optimalloans.com email@example.com
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What steps to take when buying a home
- Get your finances in order and check your credit score. The higher your credit score is, the better the chances to qualify for a better mortgage rate and type of loan.
- Get pre-approved for a mortgage. Before you start your search you have to see if you qualify to buy a home.
- Determine your wants and needs before you start house hunting. Finding the right house can become a long process when you don’t determine in advance what your wants and needs are.
- Once you find your dream house you need to write an offer with help of a real estate agent. Your agent will help you to negotiate the price.
- Inspections, a home inspector will let you know what condition the home is in and what kind of repairs are needed before you buy the home.
- Closing progress/Escrow. The period between offer acceptance and the final settlement is known as escrow, which can take several weeks
Don’t buy if you can stay put
If you cannot commit to stay put for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying a home, you may end up losing money if you sell too soon, even in a rising market.
When you are buying to rent out the property, ask your agent for how much you can lease your rental every month. Your expenses (e.g. property tax, maintenance and mortgage costs) have to be lower than your monthly rent income in order to make profit.
Homes gain on value over time, some years more and some less, depending on the market. The home appreciation rate varies from region and neighborhood. Therefore you should figure out what neighborhood has which appreciation rate before you start house hunting.
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