Homeowner’s who currently have FHA mortgages might want to check with us to see if now is the right time to refinance. Fannie Mae and Freddie Mac are changing their guidelines at the beginning of April – and we believe all mortgage loans could be more expensive because of this.
Many of the people we talk to in NC with FHA refinance questions want to know how a Second Mortgage might change their ability to refinance. If you have a 2nd mortgage (or any junior liens like a Home Equity Loan HELOC) older than twelve months old then this would be considered a regular refinance and could not be done as a streamline refinance. If you have a second mortgage or Equity Line that is LESS than 12 months old it still might not work as a Streamline, and you need to call us with all of the details.
Some Key FHA streamline changes in the last 18 months in North Carolina:
- Seasoning : The borrower must have made at least 6 months of mortgage payments at the time of application. Most underwriters will not allow you to make the extra payments in advance, just to qualify for the streamline.
- Payment History :
Less than 12 months – no lates allowed
Greater than 12 months – allowed one 30 days late in the 12 months, but no lates allowed in the last 3 months prior to the date of the new application. This is really a trick question guys… because if you’ve been late in the last 12 months on your mortgage payments – it’s going to be TOUGH to qualify. Please bring us ALL of the documentation you have showing why you missed the payments.
- Net Tangible Benefit : North Carolina Lawmakers requires that the underwriter determine a net tangible benefit to the borrower. The NTB (net tangible benefit) must benefit the borrower by :
the reduction in the new mortgage payment to include taxes & homeowners
(or) refinancing from an adjustable rate (arm) to a fixed rate
With the NC FHA Streamline Refinance guidelines, the new mortgage payment must be 5 percent lower than the old payment. This is the requirement when going from a fixed rate mortgage loan to a fixed rate mortgage loan. There are different requirements when going from an arm to a fixed rate or from a fixed rate to an arm.
There are two kinds of FHA Streamline refinances available for those who qualify. For information how to calculate a FHA Streamline refinance with an appraisal and without an appraisal, click here.
FHA Streamline transactions for a borrower who wants to simply reduce their mortgage to fewer years (for instance going from a 30 year to a 15 year) no longer qualify. Those loans must be written as a regular, no cash-out refinance.
- Maximum Combined loan to value : If you have a second mortgage or Home Equity Loan in place, the maximum combined loan to value, can’t exceed 125%. Loan to value is the ratio between the total balances of your mortgages (so first and second mortgage balance) divided by the value.
To determine the value for streamlines with an appraisal, it’s determined by the new appraisal.
To determine the value for streamline refinances without an appraisal, we use the original appraised value.
Certifications & Verifications : North Carolina was the first state to have Preditory Lending rules… so while OTHER mortgage lenders could simply ASK you what you made – we must verify your income, and that you have a JOB at the time of closing. If you will need to bring money to cover closing costs, we must verify and document that you have the cash to do this also. If you are going to get a gift for these costs, or if you are taking them out of a retirement or 401K account, we will need to document the source of the money, and that you actually receive it (we have to provide a paper trail for the underwriter).
Remember that FHA made some pretty sweeping changes to it’s Mortgage Insurance Premiums last fall – so when you call, we are going to calculate how that is going to affect your new payment too!
If you are considering a refinance of your FHA mortgage in NC, or your considering a FHA refinance mortgage loan in Raleigh or Cary – please call Steve and Eleanor Thorne 919-649-5058 we know the guidelines, and we have the best rates available!