FHA Loan Blog

THE BENEFITS OF A FHA STREAMLINE REFINANCE WITHOUT AN APPRAISAL

    For homeowners who currently have an FHA mortgage on their primary residence, a FHA Streamline without an Appraisal is an excellent option to lower their monthly payment! This type of refinance is particularly beneficial to those with a FHA mortgage who are upside down in their home. Since no appraisal is necessary, the current market value of the home is not taken into account.

In fact, there are no ratios on a FHA Streamline because there is no re-qualifying for the new mortgage.  This means that there is NO credit check and NO income or asset documentation is needed. The lender simply needs a current payoff statement, a mortgage rating showing there have been no late payments on the mortgage (in the past 12 months) and a minimum credit score of 620. Any debt reporting on a full "tri-merge" credit report isn't reflected on a mortgage rating. Again, since there are no ratios, credit debt isn’t considered in qualifying for the new loan.

On a Streamline Refinance without an Appraisal, the new base loan amount cannot exceed the original mortgage balance. So for example, if the current mortgage note shows a balance of $205,500, the new mortgages BASE loan amount can't be more than this amount. The base loan amount plus the new Up Front Mortgage Insurance Premium determines the new TOTAL loan amount on an FHA loan. It is however, important to remember that a refund of the unused portion of the "UFMIP" will be issued through the new transaction. This essentially decreases the cash required to close on the new loan.

Since NO appraisal is needed, the borrower is required to come to closing with some cash out of pocket. Personally speaking, I ask my clients to come to close with a full (PITI) mortgage payment, then issue a broker credit for the amount over this. Also, most of my clients are able to obtain a new interest rate that is a point lower than what they currently have. More often than not, this allows me to avoid having to charge an Origination fee thereby allowing the client to come to closing with a cash amount equal to a full mortgage payment.  The amount of the broker credit varies depending on the specific transaction.

Some of the benefits of a Streamline Refinance without an Appraisal are:

• a lower interest rate
• a lower monthly mortgage payment
• the rate is assumable to potential homeowners so the lower the rate, the better
• NO APPRAISAL means the opportunity to refinance even when a borrower owes more than the home is currently valued
• a refund (through the new transaction) of the unused portion of the Up Front Mortgage Insurance Premium
• Streamline process means minimal documentation is needed

Here is an example to put the potential savings into perspective:

EXAMPLE: On a $300,000, 30 year fixed mortgage, with an interest rate of 6.75%, the (principal and interest) mortgage payment would be approximately $1945.00.

POTENTIAL SAVINGS: By simply reducing the interest from 6.75% to 5.5%, the monthly payment would be approximately $1703.00 a month. That's a monthly savings of $242.00! Or $2904.00 in annual savings. $29,040 over a decade, $87,120.00 over the course of the 30 year term.

The streamlined process only requires the file to contain the following documentation, some of which is needed from the borrower:

• Full application package with Application/Good Faith Estimate/Truth in Lending, State/Lender/HUD required disclosures*
• FHA Connection documentation (which is obtained by the broker)
• Social Security verification (copies of the borrowers drivers license and social security card)*
• Copy of the Mortgage Note and Deed of Trust (for the current mortgage)*
• Current copy of payoff from the current mortgage holder
• Mortgage rating with credit scores from all three credit bureaus
• Current preliminary title report
• Proof of homeowners insurance (obtained by the broker)*

The basic process of a FHA Streamline Refinance without an Appraisal is as follows:

• Mortgage Consultant and Borrower(s) discuss the borrower’s current rate. Then determine the best available rate to ensure a refinance is worthwhile
• Mortgage Consultant locks rate in with the lender per approval from borrower
• Borrower collects and sends (via email/fax) documentation to the Mortgage Consultant (see * items above)
• Loan is submitted to the lender (current turn times as of 08/25 are two days from submission until we receive an Underwriting Decision)
• Upon loan approval, broker clears any conditions (if applicable) in order to move towards loan documents being prepared/drawn by lender
• Loan documents are drawn by lender and sent to the closing agent
• Closing agent contacts the borrowers to set appointment for signing
• Closing agent meets borrowers for signing (my closing agent comes to my borrowers home/place of business to make signing as convenient as possible)
• From the date the loan documents are signed, there is a three day Right of Recession period. So for example, if a borrower signs on a Monday, three full days must pass before the loan can fund. In this example borrower’s signing on a Monday would have their loan funded on that Friday.
• Loan funds and records

So if a borrower's loan funds in September, the first payment on the new mortgage wouldn't be until November 1st. This is applicable for any mortgage not just FHA. Depending on the month the loan funds, there will always be a full month that is "skipped" before the new payment is due.

Interested in starting the process?

Simply email me at laura@martellmortgage.com or complete a loan application at www.martellmortgage.com/loanapplication.  I'm available 24/7 via email to answer any questions you may have and determine if an FHA Streamline Refinance without an Appraisal is best for you!

FACT - there is no one answer for everyone. There are several factors to consider when thinking about a Streamline FHA refinance of your current FHA mortgage. Below are a few helpful tips to get you started on the right track. A Streamline FHA Refinance will not be for everyone but in today's marketplace, an FHA refinance will be suitable and beneficial to most.

Do you have a 30 year fixed rate lower than 5.375%? If this is the case, you might not be one of the lucky ones who will benefit from a refinance. You are one of the lucky one's who was able to lock in a great interest rate. You may still want to consider a refinance if you plan to pay the home off or stay there another 5-10 years.

Are you planning to sell your home in the next 2-4 years? If you answer yes, then the answer will more than likely be no to a refinance, UNLESS, you are paying over a 6.5% interest for a 30 year fixed rate.

Has you mortgage insurance been cancelled on your FHA mortgage? Again, if you answer yes, a refinance may not be in your best interest, BUT, if paying higher than a 6 or 6.5% interest rate, it could be very beneficial.

Have you paid on your FHA mortgage for more than 10 years? Once again, a yes answer could mean a refinance may not be in your best interest. Rates weigh heavy in the total analysis. I would not use a definite no on this one either. I would suggest you seek advice from a very reputable and knowledgable broker. A good broker should be able to explain the cost savings or periods of time.

Those are 4 of the most common factors I can think of that might not make refinancing an FHA mortgage very helpful in the long run. There are many reasons why it will be of huge benefit for you to refinance though. I will list the most common factors I can think of.

Is your FHA interest rate over 5.375%? If you answer yes to this one, you really should consider speaking to a well versed mortgage broker. Interest rates are at 5% today with options to get in the 4.75% or even as low as 4.5%. These savings can be huge over the course of paying off your home or having more equity available to you when you decide to sell your home.

A real example is below..... 

Using a loan amount of $200,000 with an original FHA rate of 6.5%. Your principle and interest payment is $1264 a month. If you refinance into a 5% FHA loan your payments would be $1073 a month for a monthly savings of $190 a month. Sounds good, RIGHT? Listen up, here is where it get's interesting. Say you refinance into a 5% rate BUT you continue paying the same payment you are used to paying. This applies an extra $190 a month to your principle balance. I know your thinking so how is that interesting....not seeing it yet? Well, how about if I tell you paying this little bit extra every month, you will only pay on the home for 21 years. Then you own it after 259 payments instead of 360. Now if you take the savings of 101 months times your "WOULD BE MORTGAGE PAYMENT" you end up saving $127,664. Yes I typed that right and it is not a typo. You will save over $127 thousand in payments compared to keeping the 6.5% rate you currently have. Does that sound interesting to you yet? I thought so! Speak with someone who knows how to tailor the information to your specific scenario and you too will see some serious savings.

Do you owe more than the home will sell or appraise for? Then this might be for you. If you have owned the home for 3 or more months and have not been late, you can do an FHA streamline refinance. You will not need an appraisal and documentation will be minimal. You can refinance as long as you do not increase the original loan amount. You will need to come in with some or all closing costs to avoid increasing the loan amount. The savings alone can repay the closing costs in as little as 12-36 months. Then you can begin adding the savings of refinancing.

Are you on an Adjustable Rate Mortgage (ARM)? YES, this is for you! If you plan to keep the home, you must consider getting on a fixed rate mortgage to prevent you interest rate from adjusting. If you gamble with your financial freedom, you could be rolling the dice in the dark. It is not worth the few dollar savings each month to potentially be out on the street when the bank starts foreclosure from missing payments you can no longer afford. In my opinion, it just is not worth the risk.

FHA interest rates are near record lows FHA mortgages are assumable House values have dropped in AZ No appraisal is required Limited documentation is needed Savings are HUGE!

Apply online for your FHA Streamline Refinance

Use the AmeriDream program with an FHA mortgage to keep your out of pocket costs to a minimum.

Visit the AmeriDream website for additional information or contact one of our FHA Loan Specialists to discuss your options for buying a home in Arizona.

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We can help you with an FHA loan in Arizona, California, Minnesota, New Mexico, South Dakota and Wyoming. Use our easy online FHA Loan Application to start the process today or complete a quick questionaire and one of our FHA Loan Professionals will contact you.

FHA Loans are the hot mortgage to have in today'ss market and current conditions. FHA is assumable which means when you go to sell your home, if rates are higher than your FHA interest rate, your home instantly has more value. The buyer can assume your rate and loan keeping the monthly mortgage payments lower. FHA loans only require 3% down for home purchases. This 3% can be contributed from an interested party, such as the seller or a new home builder. The closing costs can also be fron an interested party up to a total combined contribution of 6%.

FHA is not credit driven and allows for lower credit scores and even alternative trade lines.

FHA Home Mortgages are picking up where the SUB-Prime left off.

Call one of our FHA Loan Specialists today to learn more about how an FHA mortgage can help you!

If you are looking to buy a home in Arizona with an FHA loan, Check Re/Max Integrity, REALTORS