February 2, 2018
8 Important Questions On Applying For A FHA Streamline Refinance In 2018
Should You Apply For A FHA Streamline Refinance?
Here are eight question you need to ask before figuring out if a FHA Streamline Refinance is right for you? Additionally, if your answers are yes to any of these questions, you might be a good candidate for a FHA streamline refinance. Eight important questions on applying for a FHA streamline refinance in 2018. NSH Mortgage has the knowledge and tools that can help you understand the new updates for FHA streamline refinancing and how much you can save while on it.
- Have you experienced a loss of income since you bought your home? A FHA streamline does not require verification of current income.
- Do you have less than 20% equity? FHA streamline mortgage insurance may be cheaper than conventional PMI.
- Is your current FHA mortgage rate higher than today’s rates? You might save considerable money each month with a FHA streamline.
- Have you had your FHA loan at least six months? There is a six payment waiting period before you are eligible for a FHA streamline.
- Does your home have zero or negative equity? You do not need to verify your home’s current value.
- Do you have a FHA loan? FHA streamline reﬁnances are available to homeowners with a FHA loan currently.
- Is your home a little run down? FHA does not require an appraisal, so repairs are not needed to complete the reﬁnance.
- Have you made the last three payments on time, with a near perfect payment history for the last 12 months? Just one late payment is allowed to qualify for the FHA streamline. In addition. Your existing loan has to be paid current.
Mortgage Insurance Requirements
The FHA Streamline Refinance is a FHA insured mortgage, and FHA borrowers must pay two types of mortgage insurance an upfront payment. Which can be wrapped into the new loan, and an annual payment split into 12 installments, paid with your mortgage each month. If your current loan was endorsed, insured, before June 1, 2009, you qualify for a reduced upfront premium of just 0.10% of the loan amount, or $10 for every $100,000 borrowed.
Your monthly mortgage insurance is just 0.55% of the loan amount annually. Most of those refinancing newer loans pay 0.85% per year, and the upfront MIP is 1.75% of the loan amount.
FHA MIP Refund Chart
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For example, a homeowner who refinances a FHA mortgage after 11 months gets a 60% refund of his upfront MIP. If he waits 30 days longer to refinance, the refund drops to 58%. After 36 months, no refund applies.Those who refinance within the three years of their existing loan start date, will be eligible to get a refund on previously paid upfront MIP. The size of the refund diminishes as the three year window elapses. It starts at 80% if you pay off your FHA loan within one month of taking it out, and drops by 2% per month, down to 10% if you repay it in 36 months.
This is why it is rarely a good idea to wait to refinance with the FHA. With the FHA Streamline Refinance program, the sooner you refinance, the bigger your refund, and the lower your total loan size. This lowers the monthly payment and preserves the home equity two huge positives.
Annual MIP For Newer Loans
The annual MIP schedule for a FHA Streamline Refinance which replaces a loan endorsed on or after June 1, 2009 is as follow:
- 15 year loan terms with a LTV over 90%; 0.70% annual MIP.
- 15 year loan terms with a LTV under 90%; 0.45% annual MIP.
- 30 year loan terms with a LTV over 95%; 0.85% annual MIP.
- 30 year loan terms with a LTV under 95%; 0.80% annual MIP.
Note that these MIP costs may be lower than what you are paying currently. In January 2015, the FHA lowered its mortgage insurance premiums on 30 year loans, making it less expensive to carry a FHA home. If your current FHA MIP is higher than what is shown above, consider starting a refinance immediately to benefit from a new, lower FHA MIP.
Annual MIP For Older Loans
Annual MIP is similarly cheap for older FHA loans. For a FHA Streamline Refinance replacing a FHA loan endorsed before June 1, 2009, the annual MIP is 0.55% annually, or 55 basis points. 15 year fixed rate mortgages with LTVs of 78% or less pay no annual MIP.
How To Cancel FHA MIP
The FHA requires some homeowners to pay for their mortgage insurances while their loan is in effect. If your FHA Streamline Refinance replaces a loan endorsed on or after June 1, 2009, the rules for your FHA MIP cancellation are:
- LTV of 90% or less at the time of closing: You will pay MIP for 11 years.
- LTV greater than 90% at the time of closing: You will pay MIP for the life of the loan.
The FHA MIP cancellation policy applies to 15 year loan terms and 30 year loan terms equally. If you have the cash to pay your balance down to less than 90% of the original home value, you can get more favorable terms. If your home has increased, you should probably explore other alternatives to FHA.
The conventional mortgage loan through Fannie Mae or Freddie Mac, which is available with nearly every mortgage lender, may be cheaper than the FHA refinance because you may be able to reduce or drop your mortgage insurance altogether. The FHA allows its homeowners to refinance to cancel FHA MIP.