BIG FHA Streamline Refi news (for FHA loans prior to June 1, 2009).

Re: FHA UFMIP on larger loan amounts in States with modest closing costs

For Streamline Refinances of loans that were endorsed by HUD after May 31, 2009, and new FHA loans, the UFMIP is 1.75%.(Prior to June 2009 is a very low .01% for Streamline Refis and is negligible.)

As previously mentioned, it can either be financed into the new loan or included in the closing costs. Most roll the UFMIP into the new loan.

Depending on the amount of your lender credit (which is a percentage of the loan amount), it may prove worthwhile to consider including the UFMIP in your closing costs, to be covered by the lender credit. This option will prove more feasible on the larger loan amounts in States with lower closing costs where there may be an excessive lender credit far exceeding what you need for the basic closing costs.

For cash flow purposes having the lender credit cover both closing costs and prepaid expenses (i.e. escrows) is very attractive. However, if you can lay out the escrows that you know will be refunded from your current escrow account, and if your loan amount is high where an excessive lender credit is realized, considering paying the UFMIP within the closing costs in lieu of financing it into the new loan amount can be beneficial.

Closing costs vary quite a bit from State to State so there is no black and white formula or number to go by, but an analysis of your specific scenario may wish to consider this. Again, this would be something to consider on higher loan amounts and in cases where the lender credit exceeds the closing costs and you can bring the escrows to the table (knowing a current escrow refund will be coming). After all, this is FW and avoiding the UFMIP in your loan amount will also reduce the total loan amount, reducing your monthly payment too.

-Adam
Old Hippy & Mortgage Pro

Quote from tiedyed1 : I am pleasantly surprised to update this thread after my post a week ago and share that 3.25% is a very viable rate for a FHA Streamline with a decent credit to cover most if not all costs, depending on the loan amount and State. -Adam Old Hippy & Mortgage Pro

So here's my situtation. It sounds like it would be beneficial for me to pursue an FHA streamline. I closed on my house (in California, 93505 zip code) in July 2008 with a Wells Fargo FHA loan. Bought the house for $120,000 at a 6.375% interest rate. Yeah, sounds like we got ripped off, but we were young back then . Currently owe ~$111,800 on the mortgage and the home is worth ~$70,000...freaking Kalifornia. Current payment is $917/month (this includes a monthly $46 mortgage insurance premium). I work for the federal government and make ~$80k per year. Wife is not employed.

Would I have to pay any closing costs? What would my estimated new monthly payment be? My wife and I currently have ~780 credit scores. Thanks for any insight.

Quote from jordanz12 : So here's my situtation. It sounds like it would be beneficial for me to pursue an FHA streamline. I closed on my house (in California, 93505 zip code) in July 2008 with a Wells Fargo FHA loan. Bought the house for $120,000 at a 6.375% interest rate. Yeah, sounds like we got ripped off, but we were young back then . Currently owe ~$111,800 on the mortgage and the home is worth ~$70,000...freaking Kalifornia. Current payment is $917/month (this includes a monthly $46 mortgage insurance premium). I work for the federal government and make ~$80k per year. Wife is not employed. Would I have to pay any closing costs? What would my estimated new monthly payment be? My wife and I currently have ~780 credit scores. Thanks for any insight.

The beauty about the FHA Streamline is you do not need an appraisal. We use the last valuation that was used in your current loan. Your income is also not fully verified...just your employment (which you have).

Here is an example how your new loan will look:

Base Loan Amount : 112,350 (est. current principal + 30 days interest)
Up Front MIP 11 (.01% as your existing loan was before 6/09)
Total Loan Amount 112,350

The rates are in the 3.25 - 3.50% area, depending on the lender credit you need to cover all costs. Compared to your current 6.375%, this would drop your payment approx. >$260/month and is truly a no brainer.

-Adam
Old Hippy & Mortgage Pro

Quote from tiedyed1 : The beauty about the FHA Streamline is you do not need an appraisal. We use the last valuation that was used in your current loan. Your income is also not fully verified...just your employment (which you have). Here is an example how your new loan will look: Base Loan Amount : 112,350 (est. current principal + 30 days interest) Up Front MIP 11 (.01% as your existing loan was before 6/09) Total Loan Amount 112,350 The rates are in the 3.25 - 3.50% area, depending on the lender credit you need to cover all costs. Compared to your current 6.375%, this would drop your payment approx. >$260/month and is truly a no brainer. -Adam Old Hippy & Mortgage Pro

Thanks for the reply! One question, you said "depending on the lender credit you need to cover all costs"...what does this mean? Are the fees/closing costs that I have to pay up front or that get rolled into the new mortgage?

I also saw somewhere that the new MIP costs like tripled. So instead of my $45/month MIP cost, it would be close to $150. Is that true?

Quote from jordanz12 : Thanks for the reply! One question, you said "depending on the lender credit you need to cover all costs"...what does this mean? Are the fees/closing costs that I have to pay up front or that get rolled into the new mortgage? I also saw somewhere that the new MIP costs like tripled. So instead of my $45/month MIP cost, it would be close to $150. Is that true?

Say, the current rate is 3.25%. If you finance at 3.375% the lender might give you $X (say $2500) for taking a higher rate that will be applied toward your closing costs.

The way it was explained to me is that you can buy points (pay to have a lower interest rate) or the opposite, get a lender credit for taking a slightly higher interest rate.

That means little to no closing costs will be paid out of pocket or rolled into your mortgage, the broker will pay them. The downside is your mortgage maybe be $10-$20 more a month but your are still saving a huge amount then when your were paying 6.375%.

bta15 - put the different % rates into an amortization calculator to see which is cheaper.

Quote from drsketch : bta15 - put the different % rates into an amortization calculator to see which is cheaper.

Well obv over the life of the 30 year loan the lower interest rate is going to be cheaper (after all these companies aren't in the business to lose money) but that doesn't take into account a few factors:

-Are you going to keep the loan 30 years?
-Do you have the cash necessary to cover closing costs now?
-If you invest the cash now via other means can you beat the 1/8 or 1/4% over the life of the loan?

Quote from jordanz12 : Thanks for the reply! One question, you said "depending on the lender credit you need to cover all costs"...what does this mean? Are the fees/closing costs that I have to pay up front or that get rolled into the new mortgage? I also saw somewhere that the new MIP costs like tripled. So instead of my $45/month MIP cost, it would be close to $150. Is that true?

1. As you would be in the pre-June 2009 category, the monthly MI would be $51.49/mo (.55%)

2, As others mentioned, depending on the rate you will receive a certain credit towards closing costs and prepaid expenses (i.e. escrows, interest due for the month closing).
This is not a quote, but for example purposes:
A rate of 3.25% may provide you a lender credit of $1404 (1.25%)
A Rate of 3.375% may provide you a lender credit of $2247 (2.00%)

As your current rate is so high, you have plenty of room to benefit from a significant drop in payment at higher rates that cover all costs so little to no out of pocket is needed.

-Adam
Old Hippy & Mortgage Pro

anyone know a site where you can get the current 15 year & 30 year fixed fha rates?

HUD provides FHA pricing to the lender who then in turn will provide a rate that is priced with either a cost or a lender credit. HUD does not post the rates but each individual lender will offer their own pricing on a daily basis, just like conventional pricing.

One thing definitely annoying about FHA Rates (in my opinion) is that the 15 Year product is so closely priced to the 30 Year; so do not expect a lower interest rate. HOWEVER, the Up Front and Monthly MI premiums for the 15 year Term are significantly less than the 30 year, so that should be taken into consideration.

Currently, rates of 3.25%, 3.375% and 3.50% will provide ample lender credits to cover all closing costs in most cases; and when the credit exceeds the costs the excess goes towards your prepaid interest and new escrows being established (while you will be getting your current escrows refunded post closing from the lender being paid off).

It really depends on what State the property is located in , as costs vary from State to State, and loan amount, as the lender credit is based on a percentage of the loan amount.

-Adam
Old Hippy & Mortgage Pro

I too am trying to refi with streamline. When you talk about lender credits, do all lenders offer this credit? I have not been offered this. I think I remember earlier in this thread that some lenders add their own stipulations. Should I shop around? What amount for closing costs should I expect? Here is my example:

bought in 2002
payoff $106,000
30 yr refi
3.25 %

Please help. Also, what states are you licensed in?

Yes, all lenders have their own 'overlays' to pricing and certain guidelines specific to them, but as you rloan amount is $106,000 and the credit is based on a percentage of the loan amount you will not see a tremendous credit at 3.25% but most lenders should extend some credit to offset closing costs.
The higher the rate, the larger the credit; and you should weight that when evaluating what is best for your scenario. .
-Adam
Old Hippy & Mortgage Pro

I have been told closing costs around $3300.00. If streamline requires less paperwork and verification, wouldn't closing costs be much less. By the way, I'm in Mississippi. Also, would going with my present lender instead of a new one, void the need for title insurance and such since I'm just refinancing and all that was done with original sale? Thanks for your time and help.

Quote from a10ecdad : I have been told closing costs around $3300.00. If streamline requires less paperwork and verification, wouldn't closing costs be much less. By the way, I'm in Mississippi. Also, would going with my present lender instead of a new one, void the need for title insurance and such since I'm just refinancing and all that was done with original sale? Thanks for your time and help.

Great question a10ecdad.

Closing costs on a FHA Streamline are reduced in two primary ways:
a) The Underwriting is easier as less documentation is needed and no appraisal needing review. With this in mind many lenders do reduce their standard Underwriting fee for FHA Streamlines.
b) No appraisal = no appraisal fee, saving $400-$450.

The other fees, such as lenders title policy, title searched, recording fee, Flood Cert Fee, and settlement fee are the same as they are required on all transactions.

While this is a reduced documentation Streamline Refinance, it is a completely new loan.
Staying with your current loan servicer would not save you any money on title insurance as a new lenders policy is necessary, and updated searches must be performed.

Depending on the State the home is located and your Loan Amount are the two largest functions of determining Closing Costs. (Keep in mind that establishing new escrows are not a cost and you will be refunded your current escrow balance back from your existing lender once they are paid off.)

Furthermore, FHA rates provide a lender credit to defray the closing costs, if not covering them all together. Lender credits can be used to reduce closing costs and prepaid expenses (i.e. escrows). The lender credit is a percentage of the loan amount. A slightly higher rate will provide a larger lender credit; so evaluate your needs and weigh your options.

Each scenario is unique and closing costs will vary. In addition to seeing what your current lender has to offer I highly recommend you obtain a quote from a knowledgable broker.

-Adam
Old Hippy & Mortgage Pro