Hi all. I have been receiving mail from Quicken Loans and others recently promoting FHA Streamline refinances with interest rates of 4%. I would love to get your advice/opinion as to whether FHA Streamlines are still possible/feasible given last year's FHA MIP changes. Details of our situation are below. Thanks in advance for any suggestions/advice as to whether this or any other type of refinance would be to our advantage and possible in the current environment.

Our FHA mortgage was originated at the end of March 2010 for $223,290 at 5.0%. (We put 5% down towards a purchase price of $231K.) Our loan was bought by B of A almost immediately. Current payments are $1198.67 (principal + interst) + $356.69 (escrow, including $90 MIP) = $1555.06. 28 years, 7 months left. Houses in the neighborhood have basically maintained value since then, and our original official appraisal was around $245K (Zillow currently estimates $235K). We're in Atlanta, GA, and plan on staying in the house for at least 10, possibly 20+ years. Both of our credit score medians are above 720.

I have found, the best rate and fastest stream line is go to your lender - BOA - as they can tell at once if it's a streamline eligible loan - every bank has different rules and regulations for their streamline process - most do not require an appraisal.  I base this on - I was with Chase bank for 4 years - my customers from Chase still contact me - I still have a great relationshipwith my local Chase Branch and Loan Officer - Chase almost always has an easier and better loan program and process for their existing customers who are eligible for a stream line loan than I can offer. 

Watch for Quickens Loan fees - most banks and brokers can easily lower your closing costs with the same rate and term -again, this is based on my experience with Quicken customers who have come to me with a GFE from Quicken.

Based on current annual (monthly) fha premiums the benefit would be small. Take a solid look at the numbers, but I would be inclined to believe that the savings is minimal based on your loan amount and current rate. (Your monthly PMI would more than double eating away at the rate savings)

The increase in FHA monthly MIP has effectively killed FHA refinances. Of course you don't hear about that on the news.

If you pay $70 a month now for FHA MIP you will probably add $90 to $100 ($160 monthly) to that amound. Killing any benefit from the lowering of the rate.

Nice huh?

What they should do .....is to let people who are refinancing keep thier exisiting Monthly MIP amount. They really want to help people who need it the most? Thats what they should do.

Let new purchases use the new factors.

Another interesting aspect of an FHA streamline. They dont view cutting the term of the loan as a benefit to the borrower. Even if it lowers the current monthly payment.

FHA is goofy right now. Well, EVERYTHING mortgage related is kind of goofy now.

Thom,

What's been posted is correct. The new MIP monthly premium is going to eat up the monthly savings. But there are a couple of other items to consider and it may be worth having a lender work up an actual quote.

1. when you refinance you're eligible to get a refund of a portion of your upfront funding fee. This would come close to covering all of the new upfront. Meaning you won't be adding to your current loan this time around for the upfront MIP.

2. If you're planning to stay in your home loan term the MIP will come off when you get to 80% of your loan to value (based on the original value). That would be a large savings. This usually happens around month 110 in a normal payment amortization.

3. If you sell in the future and rates are higher a buyer could assume your loan through FHA. That means you could have an advatage at 4% over another home that doesn't.

Lastly, if you can refinance and save anything on a monthly basis and have a low net time frame to recoup the costs of the refinance and the above benefits have value to your situation that I would move forward.

I would love to do an FHA streamline refinance, but I keep bumping my head against the wall when I try. I have and FHA loan for my townhouse, bought about 9 years ago. My interest rate is 7.3/8 %. I tried to do a FHA refinance years ago, as i was eligible for a refund, but the mortgage broker insisted I did not have a FHA loan. I could not find my paperwork and forgot about it as I thought I would sell soon enough.

Here I am years later, stuck in this home and it is becoming unaffordable. I tried to refinance and again I got the run around. It seems my mortgage company is reporting my mortgage as something else other than an FHA loan. I called FHA and got my FHA #, then the Broker tells me I need to do some "credit clean up" for $295.00 and that I would be better off with some other type of refinancing.

So my question is what is involved with the FHA Streamline refinance? I know they don't need to do an appraisal, but how much financial stuff do they need? I already have a loan guaranteed by them. Finally, does anybody have a good Broker could they refer me to?

Thanks.
Richard Bacon

Mr. Bacon,

Request the settlement documents from the title company or settlement agent who closed your FHA loan. They have proof that your loan is FHA and not another kind, even if your credit report says otherwise.

FHA Streamline requirements are pretty lenient:

Perfect, 12-Month Payment History

210-Day "Waiting Period" Between Refinances

The Refinance Must Have Purpose (in your case, lowering your rate/payments)

Appraisals Not Required (the new loan amount will be the original purchase price, or the value on your most recent appraisal)

Income and Employment aren't verified, either, so there's no financial information you need to provide. Those are the basic FHA requirements, but the particular lender you use may have additional standards. It sounds like you qualify, though. You just need a broker who knows guidelines better.

A bit of an over simplification...many lenders overlay FHA streamline guidelines and I would imagine that plenty would want an appraisal on an outside serviced manufactured home. As for the new loan amount...what do you mean when you say it would be the original purchase price or most recent appraised value? FHA streamlines only allow you to add payoff, interim interest, and uprfont MIP.