For many, many years, the FHA Streamline refinance was a borrower’s dream. Once upon a time, a homeowner/borrower could easily and quickly refinance their FHA mortgage loan and get a lower rate and payment with no qualifying at all. No appraisal was required, no credit check, no credit score, no job verification.
Gone are those days. The FHA Streamline refinance is all new for 2010.
In order to protect the solvency of the Federal Housing Administration (FHA) insurance fund, many changes have been implemented – making it a not so easy and quick refinance. Here are the critical program changes:
- The loan being refinanced must be in existence for at least 6 months.
- For loans outstanding for 6-12 months, no 30-day late payments are allowed.
- For loans outstanding 12 months or longer, a maximum of one 30-day late payment in the last 12 months is permitted.
- Investment properties are no longer eligible to refinance to ARMs.
- Appraisal needed in most cases.
- Borrower must verify he/she has funds on hand to close – if any funds are required.
- The new refinanced loan must reduce principal, interest, taxes and insurance by 5%, or the loan must change from an adjustable rate mortgage (ARM) to a fixed-rate mortgage. The fixed rate cannot be more than 2% higher than the borrower’s old ARM rate.
- The lender must certify that the borrower is employed and has current income.
- The payoff statement of the current mortgage cannot include delinquent interest, late charges, or escrow shortages.
These changes are huge and will eliminate any chances of refinancing for so many homeowners. With a conventional refinance being even more impossible, these borrowers may be stuck in their loans at the higher rate for quite a while.
Myself and thousands of mortgage professionals across the country warned borrowers of the pending changes. There was sufficient notice of this to allow anyone refinance who wanted to.
But anyone wanting to buy a home or refinance is well advised to consider the unstable market that still exists. Changes constantly occur that disqualify many who otherwise would. Just get out there and do it. As of today, waiting will also bring you a higher rate – more than likely. Rates are on the way up.
Call me for more information about FHA loans in New Jersey.
Until my next post . . .
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{ 2 comments… read them below or add one }
Can I do a streamline loan where I don’t pay the closing costs? A co-worker said he did his that way and not as much was added to the new loan. But he did it back in 2006. Stil possible or not?
@Leonetta – Yes, you can do a streamline and have the lender pay the closing costs. This option has not been as common now as it was a few years back for many reasons. And each borrower scenario is different. Some will be able to do it with the lender paying costs and some won’t. When borrowers opt for the lender to pay costs, the interest rate will be higher than if the costs are added to the new loan. It’s a trade-off that should be carefully analyzed to see what’s best for the borrower. Let me know if you want me to do a comparison for you.