With all the media coverage on the HARP refinances that Fannie Mae and Freddie Mac allow, the FHA streamline hasn’t gotten much attention.
This refinance program is not new and is a great tool for FHA borrows to save on their mortgage payment.
You don’t need to provide income documentation (you do need to be employed) and there’s no appraisal.
As long as your payment decreases by at least 5% and you’ve been current on your FHA loan you probably qualify.
Here’s what you need to provide:
-current mortgage statement
-homeowners insurance policy
-your note (it’ll be in the papers the title company gave you when you signed for your current mortgage; it may say note or promissory note at the top)
-last 2 months bank statements to verify you can pay closing costs
-last 2 years tax returns and W2’s or 1099’s
-last 30 days worth of paystubs
-drivers license and social security card
Many times there are options to refinance with no closing costs.
What you may have to pay even if you choose the no closing cost option (most times it’s a wash):
-prepaid interest (you won’t have a payment for 30 days so it equals out)
-money to create a new impound/escrow account (once your old loan is paid off whatever money is in your current escrow account will be refunded to you so that equals out too) Your current escrow/impound account can’t be transferred to the new loan, a new one must be created.
One thing to note is your new FHA loan will be under the current FHA rules. An example: you purchased your home in March 2009. At the time FHA’s monthly mortgage insurance was .55% of the loan amount and the upfront mortgage insurance premium was 2.25%. As of 4/1/13 the monthly mortgage insurance is 1.35% and the upfront premium is 1.75%. Your new loan will have the current 1.35% monthly mortgage insurance and you’ll pay the current 1.75% upfront premium (that can be rolled into the new loan). You’ll notice than while your total payment has decreased your monthly mortgage insurance has increased.
The bottom line is that as long as your new payment is 5% (or more) less than your current it may be a financially savvy decision to refinance.
Contact us today to see if it makes sense for you.
Michael Regan (NMLS #275695) is a mortgage banker who specializes in Marin, Sonoma, and Napa counties. You can reach him at 415-672-2499 or 707-508-8473 for all your financing needs.