FHA mortgages picked up where subprime mortgages left off after 2007 when subprime became a dirty word. FHA had limited down payment requirements, no minimum credit score requirements, and had attractive interest rates. Ohio, as well as the rest of the country saw FHA originations double from 2007 to 2008.
4 years later, Ohio residents with an FHA mortgage may be wondering what options are available. The most common option is one of the simplest loan programs, the FHA Streamline Refinance.
The FHA Streamline Refinance comes in a few different flavors, but we’ll just cover the most common version, the FHA Streamline Refinance WITHOUT APPRAISAL.
- No appraisal is required. In the current housing market, this is simply the biggest and best option of this loan program. Home values in Ohio have declined faster than we have paid down our mortgages.
- No income documentation. Now don’t get this confused with the “liar” loans. Lenders will verify that you are working, but do not require documentation to calculate your monthly income. Why? Simple, FHA already insures your mortgage, so an FHA Streamline Refinance will put you in a better financial position, which makes it easier to pay your mortgage.
- Lower your interest rate. Simple, lower interest rate = lower payment.
- Take your Adjustable Rate Mortgage to a Fixed Rate mortgage.
- 15 year terms. FHA loans with a 15 year term have lower mortgage insurance requirements.
- Cannot lower the term of your mortgage. If you originally took out a 30 year fixed rate mortgage, your new mortgage will have to be a 30 year fixed rate mortgage.
- FHA program changes. Chances are when you originally took out your FHA mortgage, you paid 0.5% mortgage insurance (equates to roughly 0.5% X loan amount / 12 months) or $41.67 per month on a $100,000 loan amount. You also paid an Up Front Mortgage Insurance Premium of 2% or possibly 1.5%. Now FHA requires an Up Front Mortgage Insurance Premium of 1%, but the monthly mortgage insurance has increased to 1.10 or 1.15% (depending on loan amount compared to last appraised value). This negates alot of the benefit that a homeowner may have seen.
- FHA mortgage insurance starts over. Most FHA loans come with mortgage insurance. FHA requires that mortgage insurance to be paid for a minimum of 60 months. After the initial 60 months, once your loan balance reaches 78% of the homes value, the mortgage insurance will drop off. When you close on an FHA Streamline Refinance, that 60 month requirement starts over.
Every situation is different, and it only takes a few minutes to determine whether an FHA Streamline Refinance without appraisal could benefit you.