I bought a single family house about 1 year ago and financed it using an FHA loan. My loan amount is 560K at a 5.25% fixed rate. I am thinking about refinancing, but am not sure:

a) if I should wait a littl longer

b) what my best option is (e.g. streamline vs regular refinancing)

c) which mortgage lender I should use (currently, I am with Wells Fargo)

A few brokers I have been talking to are promising me the moon...4.50% and no out of pocket cost, but it sounds too good to be true. Any help would be very much appreciated.

A,

Andrea,

I would not wait. Rates are at the lowest point in our lifetime and bond economics dictate that they cannot go much lower. As for you options with a refi, the streamline is good if you think the value of your home may have dropped at all since purchase. With a streamline you would not need a new appraisal (if you stay with Wells Fargo). However, the rate on a streamline is slightly higher when compared to a regular FHA refi.

To give you an idea....on a streamline you could avoid all closing costs and the appraisal with a rate at 4.75% on the 30 year fixed or 3.5% on the FHA 5/1 product. This loan would be fixed for 5 years and then could only change by 1% each year afterward (Great option if you do not plan to be in the home long term). 

The rate would be closer to 4.5% on a regular refi, but your loan would be subject to an appraisal. With Wells Fargo the problem you can face is that if you choose a regular refi and the appraisal comes in low, you are no longer eligible for the streamline option without an appraisal.

I work for an affiliate of Wells Fargo, please feel free to reach out with any additional questions.

Thanks,

Jason Harris

Andrea,

a) Do not wait if you are going to refi, rates are at all time lows.

b) There are several forms of streamline FHA refinance otions, credit qualifying or non, and with or without an appraisal.  You should speak to a broker/lender about the different options and the benefits and drawbacks of each.

c) You should select a broker/lender that you trust will give you a competative program and will give great service.

No out of pocket costs would not be a problem for a loan your size as it would be easy to credit you for any fees that would require you to bring money to closing.  Remember, if they told you that you needed funds to close, you don't have to sign the closing paperwork.

Check out the Directory tab above to find a loan officer near you.

Thanks a lot for your quick reply. As always this site is such a valuable source of good information.

>No out of pocket costs would not be a problem for a loan your size as it would be easy to credit you for any fees that would require you to bring money to closing.

Is FHA refinancing subsidized by HUD or by some other federal institution? I do not quite understand how my broker would end up making money if I do not incur any out of pocket expense...it sounds too good to be true. I am quite sure this is a very basic questions for you guys... Thanks again!

My first experience with a mortgage broker was nothing short from terrible. I ended up going with Wells Fargo just because they owned the house I bought, and getting a loan from them was part of the deal. Anyway, I would really appreciate if you could suggest the name of a good broker/lender near me. I live in the San Fernando Valley (CA).

Andrea,

Lenders make money two ways, on upfront costs and the yield spread on the interest rate.  That's how all loans are handled, not just FHA.  The higher the rate, the more yield spread the lender will receive, and vice versa.  In this situation, the yield spread is large enough that the broker will make enough to cover your costs as well as earning some profit.  You could possibly get a lower rate than 4.5%, but would have to pay more of the closing costs.  So if you're okay with paying some out of pocket closing costs for a lower rate, see what they have to offer. 

Thanks for the clarification. I have spoken to several mortgage brokers in my area but I am having a hard time finding one that I can trust. They all promise the moon and then do not deliver. Unfortunately, this has been my experience so far. Is there any reliable website with online reviews from multiple customers?

Andrea,

You may find reviews online, but they will likely be linked to the company as opposed to the individual originator. I would suggest reaching out to someone on this site and asking them to provide references from several customers they have closed in the last 60 days.

This site is an excellent resource and I believe that you will find most active contributors to this website are well-informed professionals.

Thanks,

Jason

Just curious, what have they been promising and then not delivering on?  Since you don't have an accepted offer on a house or started the actual loan mortgage process yet I was wondering what they weren't delivering on.  Try a local bank or credit union as well.

Andrea,

One further clarification, just to make sure that we are all on the same page.  There is a difference between "no closing cost" and "no out of pocket costs".  With no out of pocket costs, your closing costs and settlement charges are rolled into the new loan, but you will not have to bring money to the closing.  With a no closing cost loan, your fees are paid by the originator.