There seems to be some confusion about FHA Streamline Refinances, and what they can do. There are 3 different types of FHA Streamline Refinances, and significant differences in each one. Most loan officers know about the "non-credit qualifying" FHA Streamline Refinance, but there may be reasons to use one of the others.
A recent HUD Letter is announcing some major changes (Mortgagee Letter 11-10) to the Annual Mortgage Insurance Premium (MIP). The letter states that the Annual MIP - this is the one the borrower will pay monthly - is going up by 25 basis points in April 2011.
It may not seem like much, but it amounts to an increase in the monthly payment of a $300,000.00 mortgage of about $62.00 per month. That's only slightly less than the increase in payment that would result from a 3/8% increase in the rate on that amount of loan. There is still time to get the refinance done. Take a look at the types of FHA Streamline Refinances below to see if one of them can help you or someone you know.
- Non-credit qualifying FHA Streamline Refinance - This is the "Traditional Streamline Refinance" (or at least as close as we still have). In this scenario, there is no income qualifications, and no appraisal. For most lenders, the borrower is still required to have a middle FICO score of 640, and meet some other minor requirements.
- Credit Qualifying FHA Streamline Refinance - This is a refinance in which the borrowers provide income documentation and qualified for the loan. This might be used if a borrower is removing someone from title during the process. An example would be if a borrower had a co-signor (or co-signors) when they ought the home, and wanted to qualify without them. This would not be allowed in the "Traditional Streamline Refinance" described in number 1 above.
- Non-Credit Qualifying FHA Streamline Refinance with Appraisal - This is similar to number 1 above in that the borrower is not required to provide income documentation. The appraisal however, would allow for the borrower to raise the loan amount to incorporate closing costs, and possibly get a lower rate. The recent Mortgagee Letter (2011-11) is making this type of FHA Streamline Refinance unnecessary because the loan amount won’t be able to be raised and include closing costs. The letter gives 60 days from the date it was issued to implement - letter is dated February 14, 2011.
There is still time to act and take advantage of these loans. You have to do it soon though. Once the HUD Letter is implemented, the increase in mortgage insurance may make the refinance not make sense. We have increased our capacity for the next 60 days to help as many people analyze their situation as possible. If you think you can benefit from one of these programs, call, email, or simply follow one of the links to the side to my web page to apply.