FHA credit scores and FHA streamline refinances - The Basics - Part 2 of 3

 

HINT - PLease read Part 1 first - the link is below.

 

Okay, Jeff, I have heard that you could do a FHA streamline. Yes, this is true, but FHA now states that you can't make application on the new refinance until the borrower has made 6 monthly payments. This is stated in Mortgagee Letter 2009-32.  There are 2 types of FHA Streamlines.

 

1.) FHA Streamlines with an appraisal - Even if you bought a new home with lots of equity, you have to wait 12 + months before you are allowed to use that equity. If you are going to refinance before the year is up, the rule of thumb is that you have to use the lower of the two, either the new appraised value or the original purchase price. So if you are refinancing before the 12 months are up, you will be using the original purchase price. If it appraises for less than what you bought it for, it only leaves you the option of the FHA Streamline without an appraisal. You can roll the closing costs in on this type of loan, as long as it fits into the 97.775% LTV.

2.) FHA Streamlines without an appraisal - The new formula states that in most cases, you would need to pay all closing costs out of pocket.

 

Watch out for those sharp fish hooks...

Meaning that there will be some loan officers that will plant misleading seeds in your head to real you in.... hook, line, and sinker. Either because they want a sale or because they just didn't know about the new FHA Streamline changes.

What such seeds could be planted?

• You can refinance in 6 months.

• Rates are low and should still be low by then. Don't worry if they increase a tad. Sorry, but my crystal ball broke decades ago. Understand the interest rates and read : Mortgage Market Reports for September 2010

 

What seeds aren't planted in your head?

• Rates could go up and have gone slightly up in the last week or so.

• Refinancing - Each state is different when it comes to escrow accounts, how many months of property taxes have to be escrowed. So total closing costs could range from $3,500 to $10,000. This is also dependent on the size of the loan amount.

• Many lenders want a credit score of 640 + for all FHA Streamlines.

• Any FHA guidelines could be changed at any time by either the lenders (because of lender overlays) or by FHA themselves, possibly making financing harder in the new future.
  

 

 

The FHA Loan Credit Score Series -

• FHA Loans with FHA credit scores - Understanding what is allowed & what can be done - Part 1 of 3

• FHA credit scores and FHA streamline refinances - The Basics - Part 2 of 3

• FHA credit scores - Your credit scores aren't the only thing that determines your mortgage approval - Part 3 of 3

 

Some of you might be asking about conventional loans then. You can't do a conventional loan with less than a 620 credit score.  And I wrote this post and a series of posts comparing FHA loans vs Conventional loans with different credit scores and down payments.

• FHA Loans vs Conventional Loans - Proof that FHA home loans with 5% down after major change are still cheaper 09-01-10

 

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

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

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc