FHA Streamline Refinance Cost Reduction

An FHA Streamline Refinance  is incredibly easy to do.

With nothing more than your mortgage statement and homeowners insurance paperwork in hand, you can drop the interest rate on your current FHA home mortgage to today’s historically low rates.

There is a catch though – You have to have at least a 5% reduction in payment to qualify for an FHA Streamline Refinance.

The challenge this presents is that while interest rates continue to plummet, mortgage insurance premiums have increased for FHA insured mortgages.

This leaves some homeowners in quite a bind – you have the opportunity to reduce your interest rate by a full 1% but your payment stays the same or is only reduced by a small amount because the new mortgage insurance fee is much higher than what you have now.

If your FHA loan was closed on or before May 31st, 2009, a new FHA program has been created to allow you to streamline refinance your loan without having to pay increased costs of mortgage insurance.

Today’s mortgage insurance premiums are 1.25% monthly and 1.75% upfront.  If your loan was closed in 2009, your current monthly mortgage insurance is only .55% and your upfront was 1.00%.

Reduced Mortgage Insurance Rates

Monthly MIP:  .55%

Upfront MIP:  .10%

If your loan falls into this timeline, closed on or before May 31st, 2009, you will be allowed to do a Streamline Refinance under this new program after June 11th, 2012.

Consider your Options Before Refinancing

One of the reasons you will see a drop in your payments is that you are going from a 27 year loan back into a 30 year loan.  This can be a little disheartening.

If you’ve ever looked at your mortgage statement closely, you’ve noticed that most of your payment goes to pay interest and little goes to pay down the loan balance.

If “going backwards” on paying your home loan down is something that really concerns you, one fantastic option to combat this is to continue making your same payments after lower the interest rate.

If you would like to see how much faster that will pay off your home, shoot me an email at [Broadview]S@Broadviewmortgage.com or give us a call.  It’s always comes down to running the numbers.

It either makes financial sense or it doesn’t.

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3 Responses to FHA Streamline Refinance Cost Reduction

  1. perfectgame November 14, 2012 at 11:36 am #

    I received a call from our lender saying we were eligible to Refi our current 30 yr fixed @ 3.875% down to 3.25%…but due to a couple late charges on my wifes credit, we would have to add in roughly $3300 into the loan to cover the Mortgage Insurance Premium.  We would be saving about $85/month, and would recoup the Premium in about 38 months with those savings.  Does this make sense to go ahead and pull the trigger on?

    • Legacy Content November 14, 2012 at 6:00 pm #

      @perfectgame FHA requires a minimum 5% improvement in your payment to qualify – is there a 5% improvement here?  If you’re using a FHA streamline refinance loan, there is no credit report required.  There should be no home loan insurance premiums that would be associated with a borrowers credit score.  I don’t have enough details to know if what you are being offered is fair, but I would recommend that if you are not completely sure of the costs and terms of this loan, I would make sure that your loan officer is explaining everything to you.  If you’re not confident about what’s being offered, get a second opinion!  An FHA streamline should be about the same for most lenders.  If you’re in Golden State, I would be willing to take a look at it – I don’t think we’re as low as 3.25% as of days end today, so I’m not sure about that rate either.

    • eriksj76 November 15, 2012 at 8:31 am #

      @perfectgame To piggy back on this, right off the bat I can tell you with certainty that there would not be a 5% benefit from going from a 3.875% to a 3.25% under the FHA Streamline Program.  Also, it depends on what kind of lates you have. If you have any 30 day lates on your home loan in the last 12 months, you are not eligible.  Lates on consumer debt would really only affect your score.  It may be possible that your lender is offering a special program of their own using a traditional refinance option where they can choose to waive the fees.  Some lenders such as BofA and Wells do not run credit if you are already a customer.  Just make sure.  If this is the FHA Streamline program they are pitching, its not possible under the scenario you described.  If its another program, it may be possible.  Ask.