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New FHA Guidelines for Streamline Refinance in 2010
Under today’s 2009 FHA streamline refinance guidelines, homeowners with FHA mortgage loans are able to lower their monthly mortgage payment when FHA reduces the interest rate. Today’s guidelines allow homeowners to refinance without an appraisal or verifying income and assets with fast turnaround times. Even homeowners with low credit scores and no jobs are eligible. FHA figured since they were insuring the mortgages to begin with, helping homeowners lower their monthly mortgage payment which in turn should lower their risk of foreclosure.
What’s Changing with FHA Streamline Refinances in 2010?
In a letter from The Office of Housing and Urban Development dated September 18, 2009, the guidelines for 2010 FHA streamline refinances, effective January 1, 2010, are changing drastically. The biggest changes to the FHA streamline refinance are:
- FHA homeowners must be employed when they submit their FHA streamline refinance loan application
- FHA homeowners will be required to verify assets needed at closing
- FHA homeowners must have a full appraisal done in order to add “roll-in” closing costs to the refinance
- The maximum mortgage amount for a streamline refinances without an appraisal cannot exceed the outstanding principal balance and the new upfront mortgage insurance premium
- For streamline refinances with an appraisal, discount points (buying down the interest rate) can no longer be rolled into the new mortgage
2009 Streamline Refinance vs. 2010 Streamline Refinance
| 2009 Streamline | 2010 Streamline |
|---|
| No appraisal | 2010 Streamline |
| No maximum loan-to-value | Max loan-to-value to 97.75% |
| No asset verification | Assets verified |
| No income verification | Income verified |
| Low credit scores ok | Higher credit scores required |
| Quick closings | No quick closings |
FHA has permitted streamline refinances on insured mortgages since the early 1980's. The "streamline" refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:
GUIDELINES FOR QUALIFICATION
In order to qualify for a Streamlined Refinance your original home loan must be an FHA loan in good standing and the refinance must lower your monthly interest payments. This type of refinancing option reduces your monthly expenses by lowering your payments but there is no option to receive cash back. This works well for people who are in good financial standing with no significant debt because it allows you a little extra money each month that can be put to good use elsewhere. Keep in mind that FHA refinancing options are only available to homeowners who are currently using their home as their principal residence. This is strictly for homeowners to be able to refinance for a better rate with NO CASH OUT. The process can take as fast as two week on an average to complete underwriting and close the loan.
If you recently refinanced or purchased a home through FHA and are looking to do a streamline refinance, please note the following guidelines.
IMPORTANT
FHA will not require a new appraisal, as long as we don’t increase the original loan balance of your FHA loan, this could be found on your (Mortgage Note). If you increase the loan amount to cover your closing costs, a new appraisal will be required to determine if there is enough equity in your home to cover the additional closing cost. If the value has declined below your loan balance, then ordering a new appraisal will not help you cover the difference and will be a waste of money, since there is no equity. In this case, you will have to cover the closing costs out of pocket for the loan. If you are saving a substantial amount every month on your mortgage payments, it is something to consider and can benefit you and your family in the future.
Following documents needed to expedite the FHA Streamline Refinance transaction.
- Drivers License & Social Security Card
- Mortgage Note
- Mortgage Statement
- VOM ( Verification of Mortgage history, no late in the past 12 months) Exceptions apply
- Declaration page of Insurance
- Property Survey or Condo Association must be FHA approved. (can be determined by a questionnaire form)
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You can fill out our Online Application for a free quote and an FHA/VA specialist will contact you within 24 hours. We will give you professional advice and explain the pros and cons of your refinance transaction. We are here to assist you on all your questions about FHA/VA insured Loans and properly educate you, for you to make the best possible financial decision. |
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