FHA changed it’s guidelines so that VERY little is required to qualify for a FHA Streamline Refinance, however, in North Carolina, we have our own State mandated standards, so again – many of the NC Banks can not offer this program the way FHA intended for it to work – WE DO!
FHA says that to qualify:
- Employment verification is not required with an FHA Streamline Refinance
- Income verification is not required with an FHA Streamline Refinance
- Credit score verification is not required with an FHA Streamline Refinance* (See notes below regarding AUS findings)
- A new appraisal is not required with an FHA Streamline Refinance
Even though we don’t have to verify your job, get a credit score *(see note at bottom regarding credit) or do an appraisal there are some MINIMUM qualifications that must be met (no exceptions).
Current Mortgage Must Be Paid As Agreed For Last 12 Months
FHA is not going to help you refinance to a lower FHA mortgage rate if you have been past due on payments in the last 12 months. You must be current at the time of closing, and you will not qualify if you’ve missed 1 single payment in the past 12 months. (See the * at the bottom regarding Credit)
6 Mortgage Payments Required Between Refinances
Our FHA lenders also require that borrowers make 6 mortgage payments on their current FHA loan, and that 210 days pass from the most recent closing date, in order to be eligible for a Streamline Refinance. You can apply and be approved for the refinance, we just can’t close the loan until after that 210th day.
Net Tangible Benefit
FHA Streamline Refinance borrowers must state “WHY” they want to refinance. Unfortunately, taking cash out of your home, is not considered a “Net Tangible Benefit” for a Streamline Refinance. Because they are not requiring an appraisal, they are not going to let you get more money out. They will let you reduce the terms, from 30 year mortgage to a 25 year mortgage, for instance, or go from an Adjustable Rate to a fixed rate – or simply lower the interest rate… but not cash out to pay off bills. That’s considered a “traditional” FHA refinance (and we do those too – you just have to get an appraisal).
“Rolling In” Closing Costs For The Streamline Refinance
Many Homeowners are use to a mortgage refinance scenario where they simply “roll in” the closing costs associated with the refinance. Again, because they are not requiring an appraisal, FHA prohibits increasing a Streamline Refinance’s loan balance to cover the costs associated with closing the refinance.
The new loan balance is limited by the math formula of (Current Principal Balance + Upfront Mortgage Insurance Premium). All other costs – taxes, origination fee, attorney fees, recording fees – must be either (1) Paid by the borrower as cash at closing, or (2) Credited by the loan officer in full.
If the loan officer is paying the closing costs – the math gets a little tricky because of the new limits we have on what we are allowed to pay and earn. This is especially true on loan amounts under $100,000. It’s important to remember, however, that when you refinance, you “skip” a mortgage payment. Between what the loan officer is allowed to pay, and the money you will have that you won’t be sending off in a mortgage payment, we can generally make this work!
FHA is like a PMI company. They don’t “make” mortgage loans, they insure them. One of the things to remember is that FHA”s insurance rates probably changed since you got your mortgage. You Might be able to get a refund of part of the mortgage insurance with a refinance, and that’s something we will help you with! (Depends on how long you’ve been in the house).
FHA Announced they will LOWER the FHA PMI fees for certain refinances June 11, 2012.
*Regarding No Credit Score. We use DU Automated Underwriting Systems. You will need an AUS approval. Otherwise, we need at least a 600 credit score with a Total Scorecard Approval (there are some additional guidelines that also apply).
We’ll be glad to help you learn more about the “PMI” rates for FHA, or about other refinance programs. We can also go over the Basic FHA Underwriting Guidelines with you – just give us a Call! Steve and Eleanor Thorne 919-649-5058. We’ve saved some families this year over $320 a month! That’s a RAISE, or a Car Payment! So, call us, and let’s see if it makes sense for you to refinance! We offer today’s best rates!