There are new FHA Streamline rules coming shortly, and for once, they are beneficial to those that would like to refinance.
Currently, if you do a new FHA loan, you will have mortgage insurance up-front and monthly. The up-front fee is 1.75% of the loan amount, and the monthly factor is 1.25, or $1250 a year per $100,000 of loan amount (a $200,000 loan would have $2500 of monthly MI, or $210/mo). That’s expensive. In fact, what it means is that unless your rate is currently 5.25% or higher, you can’t refinance.
Not shouldn’t. Can’t. Streamlines also carry the provision that unless the monthly payment – principal, interest, and mortgage insurance only – drops by at least 5%, no refinance is permitted. We have had people that were going to save a hundred dollars a month that were unable to refinance, because it wasn’t enough.
Now, though, there will be a new set of rules. The qualifying factors are:
- You must meet all FHA requirements (no mortgage lates in the last 12 months, credit over 640, clean title or subordination of the second mortgage)
- Your loan must have been endorsed by FHA before June 1, 2009 (we can look this up. It is NOT the date you closed)
Simple. And the benefits are excellent:
- Monthly MI factor is reduced to .55% from 1.25%, from $2500 on $200,000 to $1100, from $210/mo to $90/mo.
- Up-front MI is reduced to .01%. Yes, that’s right. $10 for every $100,000 you finance.
- No additions to FHA current rates, which are in the high 3% range
- No appraisal.
- No additions to your current loan balance. All fees are paid by the lender and FHA. Your final loan amount cannot exceed your current principal balance plus one month of interest.
- You skip a month of mortgage payment.
What this means is that if you can meet the 5% payment reduction threshold (called the “net tangible benefit”), you should refinance. Your interest rate drops and there is nothing tacked onto the loan. You will be money ahead before the ink dries on the new deal.
As you might deduce from this, we are fairly busy working on these. One catch: no case number can be assigned to your file before June 11. Right now we are able to pull a case number, underwrite, doc, close, and fund between June 11 and June 25, the last day to close loans in June for funding before July. However, if we do not get paperwork back on your loan, and have a complete file, before the 5th of June, we won’t be able to make it, and we’ll have to get it done in July. Word to the wise.
UPDATE, June 20: All streamlines for June are cleared to close, a few days early. The staff here has absolutely killed it getting these done. Everyone will close on time (yes, even you, out in Boston) and we’re going to fund early. Good news all around.
But there is some bad news, too. Wells Fargo issued a statement that they will not accept any more streamlines, except for those it already services, after Tuesday the 19th of June, and US Bank will stop taking them Friday the 22nd. There have been rumors that all the other lenders will shortly follow suit. We therefore have a very tight window to take advantage of here, of we’re going to do a streamline for you. Please contact us immediately at firstname.lastname@example.org, or call us at 801-653-3923. It can still happen, but we have no time to waste.