The Complete Guide to FHA Streamline Refinancing

FHA Streamline Refinance is a refinancing mortgage for individuals who already hold an FHA mortgage. Other homeowners who are under a Freddie Mac or a Fannie Mae mortgage cannot use the FHA Streamline Refinancing mortgage.

The most important characteristic of the FHA Streamline Refinance program is the lack of a home appraisal. In other words, the FHA allows the homeowner to continue with the original price of the house, regardless of the current value. In fact, even if you owe a lot of money on your mortgage, the FHA readily provides FHA streamline refinancing to help you out of your situation. It allows homeowners to apply for unlimited loan-to-value with this program.

Other than the fact that there is no appraisal, the FHA Streamline Refinance is similar to other loans. One can choose between a fixed or adjustable mortgage rate and one can choose terms of 15 or 30 years. In addition, one need not worry about prepayment penalties. In addition, it provides mortgage rates that are as low as its regular FHA loans.

Qualifying for an FHA Streamline Refinance The Complete Guide to FHA Streamline Refinancing

It is quite easy to qualify for an FHA Streamline Refinance. In April, 2011, the FHA removed verification for almost everything for the FHA Streamline Refinance program. Now, one need not have employment verification, income verification or credit score verification to qualify for the FHA Streamline Refinance program. In addition, there is no home appraisal.

While this seems like an impossible idea, we need to remember how this benefits the FHA. The main goal of the FHA is to insure mortgages rather than make mortgages. Thus, it works for the FHA if the maximum number of people qualifies for the rates of mortgage today when they are low. This is because low mortgage rates result is lower monthly payments. This, in turn, reduces the chances of loan defaults.

What is Required to be FHA Streamline Refinance Eligible?

The following factors determine whether or not you are FHA Streamline Refinance eligible:

  • You should have a perfect payment history for the past three months. Since the FHA seeks to reduce the loan pool risk on the whole, it is necessary to have a perfect payment history for 3 months. However, over 12 months, one late payment is allowed.
  • There needs to be a waiting period of 210 days or 7 months between refinances. Borrowers need to make 6 mortgage payments on their current FHA loan.
  • There needs to be a purpose to the refinance. In other words, there needs to be a Net Tangible Benefit to the refinance.
  • The loan balance is not allowed to increase to incorporate loan costs.

MIP for FHA Streamline Refinance (Loans Given Before June 1st, 2009)

If you took out an FHA mortgage loan before June 1st, 2009, your upfront MIP and annual MIP, or mortgage insurance premiums, will be lowered if you refinance to the FHA Streamline Refinance program.

The upfront MIP on such loans would be 0.01% of the size of the loan, which is 1 basis point. The annual MIP would be 0.55% per annum, which is 55 basis points. The 0.55% annual MIP is true for 15 year loans that have loan-to-value above and below 90% as well as 30 year loans that have loan-to-value above and below 95%.

Meanwhile, 15 year loans at fixed rates and 78% or less LTV have to pay no annual MIP. Jumbo FHA mortgages that exceed $625,500 also pay no additional MIP.

MIP for FHA Streamline Refinance (Loans Given On or After June 1st, 2009)

The upfront MIP for refinancing on loans issued after or on 1st June, 2009 is 1.75% of the size of the loan. However, the FHA Streamline Refinance program offers to refund the MIP that had been paid previously if the homeowner is still in the first three years of the loan.

The annual MIP on refinancing of loans issued after June 1st, 2009 loans according to the loan-to-value and the loan term. 15 year loans with LTV above 90% pay 0.60% MIP, whereas those with LTV under 90% pay 0.35% MIP. 30 year loans with LTV above 95% pay 1.25% MIP, whereas those with LTV under 95% pay 1.20% MIP.

If it is a loan of 15 years with fixed rate and 78% or less LTV, there is no annual MIP. If the loan amount equals or exceeds $625,500, there is an additional 0.25% to be paid as insurance fee.

If you are a Long Beach home owner who’s been waiting and watching for the right moment to refinance your current FHA mortgage, I hope you will consider getting in touch with me soon.  Actually–today might not be a bad time!

About Ric Dizon

Ric Dizon is a mortgage consultant (NMLS 230093) with iMortgage, a premier mortgage banker in Long Beach, California. He's in love with four things in life...being a dad, his Ku'uipo Pamela, Hawaii and finding you the right home loan. More about Ric. Connect with Ric on Facebook, Google+, Pinterest, Twitter and check out his Instagram photos.

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