FHA streamline loans are very beneficial in many ways. A few things to keep in mind. FHA streamlines don't take that long, up to 10 days, and the FHA streamline rates are the same as regular FHA loans.

When comparing FHA streamlines to conventional refinances, depending on your credit score, the FHA rate in many cases will be much better.  Keeping this in mind, use a loan officer that is very familiar on how these types of refinances work. Just because it's easy to the naked eye, one still needs knowledge of how to make this work for you.

There are two types of FHA streamlines. Changes have been made as of September 18th, 2009 :

1. Streamline refinance with an appraisal : This is where you can include your closing costs within the loan amount.  The lower of the two below would be used.

• Outstanding principal balance(a) minus the applicable refund of UFMIP, plus closing costs, prepaid items to establish the escrow account and  the new UFMIP that will be charge on the refinance 

OR

• 97.75 percent of the appraised value of the property plus the new UFMIP that will be charged on the refinance..

*** Important - Discount points may not be included in the refinance now. If the borrower does agree to these points, the lender must verify that the borrower does have the assets to cover such points. ***

2. Streamline refinance without an appraisal : The calculation for this is the original principal balance(a) of an existing FHA mortgage minus the original UFMIP (upfront mortgage insurance) that is left over plus the new UFMIP that is added to the loan amount.

Key Reminder -  The outstanding principal balance(a) may include interest charged by the servicing lender when the payoff is not received on the first day of the month but may not include delinquent interest, late charges or escrow shortages.

These 2 types of refinancing are only for primary residences only. Investment properties that were originally bought as a primary residence, may only be refinanced without an appraisal to only include the outstanding principal and nothing more. Listed here : 4155.1 3.C.2.d and e

If you have a 2nd mortgage or any junior liens older than twelve months old, then this would be considered a regular refinance and could not be done as a streamline refinance. And then you would have to qualify with income and credit.

Some Key FHA streamline changes as of September 18th, 2009 (all of this goes into effect 60 days from the 18th of September):

• Seasoning : The borrower must have made 6 months of mortgage payments at the time of application.

• Payment History : Greater than 12 months or less than 12 months of mortgage payments.

A. Less than 12 months - no lates allowed

B. Greater than 12 months - allowed one 30 days late in the 12 months, but no lates allowed in the last 3 months prior to the date of the new application.

• Net Tangible Benefit : The lender must determine a net tangible benefit to the borrower, no matter if it's with or without an appraisal. The NTB (net tangible benefit) must benefit the borrower by :

the reduction in the new mortgage payment to include taxes & homeowners

refinancing from an adjustable rate (arm) to a fixed rate

(or) reducing the term of the mortgage

Keep in mind, that the new mortgage payment must be 5 percent lower than the old payment. This is the requirement when going from a fixed rate to a fixed rate. There are different requirements when going from an arm to a fixed rate or from a fixed rate to an arm. Please read the mortgagee letter, ML 2009-32.

• Maximum Combined loan to value : If subordinate financing is in place, the maximum combined loan to value, which is CLTV, can't exceed 125%.

For streamlines with an appraisal, it's determined off the new appraisal.

For streamlines without an appraisal, you use the original appraised value.

• Certifications & Verifications : The lender now needs to confirm that the borrower(s) have a job and income prior to closing. This must be done on the lender's letterhead and signed and dated by someone at the mortgage company. If assets are needed, the lender must verify and document this also.
  

*** there are a few more changes, when it comes to the FHA streamlines, yet very minor. All of these changes can be read in Mortgagee Letter 2009-32 ***

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc