Shopping for an FHA refinance
August 15th, 2012
Related FHA Stories
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- FHA loan options for high-cost housing
- FHA Changing Streamline Refinance Guidelines
- FHA Risk Study Critical of Streamline Refinance Program
- Streamline Refinance Requirements Tightening – Effective November 17
The FHA Streamline Refinance program, limited to borrowers who already have an FHA loan, received some revisions June 1, 2012, when mortgage insurance premiums were lowered for borrowers who qualified for a refinance. Income verification and an appraisal are not needed for an FHA Streamline Refinance, which encouraged many homeowners to apply even if they were underwater on their home loans. These borrowers still must meet FHA mortgage requirements and be current on their mortgage payments. In addition, each home loan must be within local FHA loan limits.
While the FHA Streamline Refinance program seems very simple, even FHA-approved lenders are allowed to set their own guidelines for loan approval. According to a recent article on BusinessWeek.com, some lenders such as JPMorgan Chase, Wells Fargo and Bank of America announced that they would limit their FHA Streamline Refinance program to current customers. The banks said they were overloaded with applications for an FHA refinance and could not handle additional new customers.
Housing industry experts told BusinessWeek.com that some lenders refuse to refinance customers, even on a Streamline Refinance, unless they had a high credit score. Some lenders are also requesting an appraisal before approving a loan, particularly in cases in which they suspect the homeowner
may owe a substantial amount on their mortgage above the value of their home.
Homeowners with an FHA home loan who want to refinance can contact their current mortgage servicer, but they also can shop around with other FHA lenders to compare programs as well as the individual requirements of each lender.
Refinancing from conventional to FHA loans
While a Streamline Refinance is clearly a better deal for homeowners because of the reduced mortgage insurance fees, some homeowners with conventional mortgage loans may also want to look into refinancing into an FHA loan. Borrowers with credit scores under 740 or 720 may want to compare their options for conventional and FHA refinancing, because while FHA loans require mortgage insurance, they do not have risk-based interest rates as conventional mortgages do. Borrowers with low equity may have a better chance of approval from an FHA loan, because the loan-to-value can be as high as 97 percent. An FHA-approved lender can calculate payments on both loans to see which one has the lowest monthly payments.
Michele Lerner, author of “HOMEBUYING: Tough Times, First Time, Any Time”, has been writing about personal finance and real estate for more than two decades for a variety of publications and websites including Investopedia, Insurance.com, HSH.com, SavingsAccount.com, National Real Estate Investor magazine, The Washington Times, Urban Land magazine, NAREIT’s REIT magazine and numerous Realtor associations.
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