We are going to provide you with an in depth look at FHA’s latest product, “FHA STREAMLINE”.
What are Streamlined refinances?
The premise of streamlined refinances is to originate a new mortgage with minimum qualifications that place the homeowner and HUD in a better position. Take Dafney homeowner, for instance, who purhcased a home with an FHA insured mortgage. The FHA insurance means that the HUD is already ont eh hook and Dafney’s home were to be foreclosed (an unfortunately common occurrence lately) TO mitigate this possiblitiy, HUD is willing to insure a new streamlined refinance mortgage that makes it easier for Dafney to make payments. So what if Danny lost his job or his home declined in value?
Who Qualifies
To qualify. FHA’s basic rule is that the Principal & Interest on the newly created mortgage must be less than the borrower’s current principal and interest payment. An exception to this rule allows increasing the current interest rate of an ARM loan by as much as 2% without additional qualifying other than ensuring that the borrower was making timely payments.
There are other exceptions to a Principal and Interest reduction, most specifically for those going to or coming from ARM loans or reducing the loan term. The bottom line is that it may not be just homeowners with high interest rates who are good canidates for a new FHA streamlined refinance.
With or With out Appraisal
Although FHA Streamlined refinances may be performed with or without an appraisal, the typcial reaction is, “Why on earth order a new appraisal if it’s not required?”
“With” appraisal is not nearly as common as “without”, but it does have an advantage. As you will see in the loan amount calculations, next, the maximum loan amouunts for streamlined refinances without appraisals are limited by the orignal note amount (plus upfront mortgage insurance premium). Calculations for ‘with appraisal’ are based on the new appraisal. In other words, if the value of the home increased since the first loan was originated, the maximum allowable loan amount is higher.
Typically, Originators choose the ‘without appraisal’ route, and pay for cost shortages through their yield spread premium (YSP) or servicing release premium (SRP, resulting in a slightly higher rate to the homeowner. The ‘with appraisal’ optioin is desirable if your trying to keep the rate low by increasing the loan amount to cover all of the new loan costs.
To learn more or apply visit http://www.Austin360Mortgage.com
With appraisal is