New FHA Streamline Refinance Rules
St Paul, MN: Home owners with an existing FHA mortgage loan - rejoice. Washington has announced new guidelines to make it cheaper and easier for homeowners to refinance FHA mortgages. The reason is pretty simple – since FHA already backs your mortgage, they’re the ones who are on the hook if you default. So if refinancing will help make your mortgage more affordable for you, it makes sense for them to help.
The updated guidelines apply to FHA Streamlined refinancing, which is about as close to automatic loan approval as any refinance program can get. There are many variables to the program, but under the best circumstances, you don’t even need an appraisal, making it a great loan for underwater home owners.
Reduced FHA Fees
The changes announced dramatically reduce some of the fees usually charged for FHA mortgages and refinancing. FHA loans have two major mortgage insurance parts. The upfront fee, and the monthly mortgage insurance. For refinances starting June 11th 2012 and after, the current upfront fee of 1 percent of the loan amount is being reduced to a mere 0.01% - equal to $10 on a $100,000 mortgage – while the annual insurance premium is being cut by more than half, to 0.55 percent of the balance, down from 1.15 percent currently.The administration estimates the reduced annual fee will save an additional $95 a month on a $175,000 mortgage, on top of the actual savings from refinancing to a lower mortgage rate.
Anyone can with an FHA mortgage can refinance at anytime, but to qualify for the reduce fees, you must have obtained your current FHA mortgage prior to June 1, 2009.
Home Lost Value?
The FHA streamline refinance option that does NOT require an appraisal is a great option for homes that have lost value. Homeowners can be underwater on their FHA mortgage (i.e., owing more than their home is worth) and still qualify for refinancing. In fact, there’s no limit on how far underwater a borrower can be and still get an FHA Streamline Refinance.If you’re underwater, but have a second mortgage or HELOC (home equity line of credit) – you’ll have additional challenges - so be sure to speak with a good licensed loan officer to determined your exact situation.
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