Yale Roth M.A., M.Ed

Posts Tagged ‘fha loan’

With mortgage rates very low, a lot people who are already in FHA loans are wanting to do a FHA streamline refinance.

What is a FHA streamline refinance?

Well, there are 2 kinds of FHA streamline refinance: one with an appraisal and one without an home appraisal.  Obviously, most people want to avoid the appraisal as it’ll save them the appraisal fee – which ranges between $350 and $450.

In order to qualify for the FHA streamline refinance WITHOUT the appraisal, your new loan amount must be lower than then the original FHA mortgage loan amount.

So, let’s say that the original FHA loan amount that you’re currently in was $200,000.

In order to qualify for an FHA streamline refinance without the home appraisal, the new loan amount can’t exceed $200,000.

Simple enough.

With the FHA streamline without the appraisal, you are not able to finance your closing costs.  So if your closing costs are $2000, you have to pay that out of pocket.

FHA will, however, allow you to finance the upfront mortgage insurance premium (UPMIP) that FHA charges, which is 1% of the loan amount.

Also, note that FHA will not allow you to streamline into a shorter term loan.  So you can’t streamline from a 30 year fixed mortgage into a 15 year fixed mortgage.

Also, your monthly mortgage PAYMENT has to drop by 5%.

When underwriting the FHA streamline mortgage, a copy of your existing FHA note and HUD-1 settlement statement from the time you took out the original FHA mortgage is required.  This will allow underwriting to verify the original FHA loan amount.

Debt to income ratios are not calculated when underwriting the FHA streamline refinance, which is why it’s called “streamline.”

A FHA streamline refinance WITH an appraisal is required when you’re borrowing more than the original FHA mortgage amount.

The FHA streamline refinance is a good loan type to get into if your currently in an FHA mortgage and have recently took it out.  Also note that the FHA mortgage rates are the same as the FHA mortgage rates for a non-streamline FHA loan.

If you’ve been your existing FHA mortgage for 5 years – let’s say – you are eligible to stop paying the monthly mortgage insurance premium (MIP).   This is a big deal.

Here’s why.

If you apply for a FHA streamline refinance, you will have to pay the monthly MIP again and it has to stay on the loan for 5 years and you’ll need 22% equity in the property to remove it – so this may not make sense even if you’re lowering your mortgage rate.

So the FHA streamline refinance will allow you to lower your mortgage rate and mortgage payment without having to go through the rigors of a normal underwriting process.

Related Posts:

• FHA Upfront Mortgage Insurance Premium To Increase in April, 2010
• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• Mortgage Refinance Questions – HARP? Is It For You?
• Should You Take Out An FHA Mortgage?
• Mortgage Services ALERT. Mortgage Rates Drop! August 30, 2011

A lot of people ask me…”What’s the difference between an FHA mortgage and conventional mortgage”?

First off…an FHA (Federal Housing Administration) mortgage is a government insured home loan.  It’s primarily designed for people whose credit rating is mediocre and who have little equity (which is the difference between what is owed on the loan and the home’s value) in their property.

For example, FHA will allow the borrower to purchase a new home with as little as 3.5% down or refinance on a rate and term refinance at 96.5% loan to value.  The minimum down payment allowed on a conventional mortgage or rate/term refinance is 5%.

In addition, on a FHA mortgage, the borrower is allowed to take cash out of their home up to 85% of the value of the home while on a conventional mortgage, the cap is 80%.

So, FHA loan guidelines are a bit more flexible.

The interest rates are comparable as well.

Another important difference between the FHA and conventional mortgage is that on an FHA loan, the borrower will have to pay an upfront mortgage insurance preimum. 

That premium is set to increase on April 5 to 2.25% for 30 yr fixed loans. 

So…on a $100,000 loan, FHA will charge and UPMIP of $2250.  They allow the borrower to finance the UPMIP so the total loan amount in this scenario would be $102,250. 

In addition, FHA does charge a monthly MIP, no matter what the loan to value ratio.  The monthly MIP will fall off after 5 years and the LTV ratio has hit 78%.

On a 15 yr fixed FHA mortgage, if the LTV ratio is below 90%, no monthly MIP is charged.

On a conventional mortgage, there is no UPMIP; however there will be PMI if the LTV exceeds 80%.

These are some of the basic differences between the 2 mortgage types.

Yale Roth is a FHA Mortgage Specialist and provides mortgages for homeowners throughout the United States. 

Call Yale at 561-350-7684 with any mortgage-related problems or visit his rate page at http://www.YaleHomeLoan.com

Related Posts:

• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• FHA Mortgage Questions – “What Is A FHA Streamline Refinance?”
• Should You Take Out An FHA Mortgage?
• FHA Mortgage FAQ – What’s A FHA Streamline Refinance? Do You Need An New Appraisal For The FHA Streamline Refinance?
• Can You Get A Get A Home Loan If Your Home Needs Repairs?

Quick reference…If you’re in the market to purchase a condo or you are interested in refinancing a condo into an FHA loan, please see below…
The FHA has set up a special on-line mailbox for all condominium questions. Go to CondoProjectApprovalInquiries@hud.gov  In fact, HUD would prefer that anyone with FHA condo questions write to this address rather than FHA Homeownership Centers (HOCs) or the FHA Resource Center. Per HUD, questions will be answered within 24-48 hours, unless additional research is required; in such cases, the inquirer will be advised that there is a delayed response forthcoming.

Yale Roth is a FHA Mortgage Specialist and provides mortgages for homeowners throughout the United States. 

Call Yale at 561-350-7684 with any mortgage-related questions or visit his rate page at http://www.YaleHomeLoan.com

Related Posts:

• Mortgage Video FAQ – “What Makes Up The Borrower’s Closing Costs When Buying Or Refinancing”?
• Mortgage Video FAQ – Is An Attorney Necessary To Close My Mortgage?
• Mortgage Video FAQ – Does It Make Sense To Do A Debt Consolidation Loan?
• Mortgage Video FAQ – What Makes Mortgage Rates Change?
• FHA Upfront Mortgage Insurance Premium To Increase in April, 2010

Effective for FHA loans for which the case number is assigned on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent.

This policy change will increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined refinance transactions. 

Upfront Premiums:

FHA will charge an upfront premium in an amount equal to the following percentages of the mortgage:

Purchase Money Mortgages and Full-Credit Qualifying Refinances = 2.25 percent

Streamline Refinances (all types) = 2.25 percent

Yale Roth is a FHA Mortgage Specialist and provides mortgages for homeowners throughout the United States. 

Go to http://www.YaleHomeLoan.com  for a personalized rate quote.

Related Posts:

• FHA Mortgage Questions – “What Is A FHA Streamline Refinance?”
• Mortgage Rate Update. Thursday, April 8, 2010
• FHA Condo Project Approval Questions/Reference
• Mortgage Video FAQ – “What Makes Up The Borrower’s Closing Costs When Buying Or Refinancing”?
• Mortgage Services ALERT. Mortgage Rates Drop! August 30, 2011

The answer is yes and no.  You’re not able to apply the $8000 (or 10% of your purchase price) as your exclusive  DP.

For an FHA loan…you need 3.5% of your own money down.  You can apply the 8k or any portion of the credit over and above your own 3.5% down.

In a nutshell…you (the buyer) need some “skin in the game.”

Hope this helps!

Yale Roth is a Senior Mortgage Consultant and specializes in FHA Mortgages.  Contact Yale at 561-350-7684 with any mortgage-related questions.

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