The California FHA Streamline refinance loan program is designed to reduce the interest rate and payment for current FHA mortgage borrowers and simplify (streamline) the refinancing process using common sense qualifying guidelines. An FHA insured streamline refinance is easier to qualify for than a regular FHA loan.
Breaking News: FHA slashes their monthly Mortgage Insurance Premium (MIP) by .5%! This means the average homeowner who purchased from 2010 to 2014 will save about $1,500/year (or more). Read details here and contact me for an estimate here.
Streamline FHA Refinance – Key Features & Benefits:
- Appraisal is no longer needed for an FHA Streamline refinance
- Income or DTI ratios are no longer calculated for an FHA streamline refinance
- Minimum credit scores are no longer required for an FHA streamline refinance
- Lender will refund your escrow/impound account
- Skip one mortgage payment
- Reduced lender fees
Who Qualifies for a Streamline FHA Refinance?
Homeowner’s in California with an existing FHA loan may be eligible for an FHA streamline refinance if they meet certain criteria and guidelines. Such as:
==> Must Meet the FHA ‘Net Tangible Benefit’ Test
FHA has set up a ‘net tangible benefit‘ test to make sure borrowers are not being taken advantage of by unscrupulous lenders who convince borrowers to refinance for the wrong reason or with little benefit.
For example, FHA requires a borrower who is refinancing from a 30 year fixed loan to another 30 year fixed loan must reduce their payment by at least 5%. This means the new principle and interest payment + the new FHA MIP, must be 5% lower than what a borrower pays now.
The 5% reduced payment is not the only net tangible benefit test FHA streamlines require. Refinancing out of a risky ARM to a fixed loan is considered a tangible benefit.
==> Made at Least 6 Mortgage Payments Between Refinances
FHA borrowers must have made at least 6 payments and wait 210 days before funding a new FHA streamline refinance. You don’t have to wait that long to get approved though.
==> Paid Your Mortgage Payment on Time for Last 12 Months
You must have made your last 12 mortgage payments on time to qualify for an FHA streamline refinance in California.
Streamline FHA Refinance Closing Costs
Unfortunately, FHA does not allow a borrower to ‘roll in’ closing or settlement costs into the new streamline loan. Since FHA is not requiring an appraisal be done, they probably don’t want the loan growing in size. To roll closing costs into the loan would require a regular FHA refinance with an appraisal.
When refinancing with me, your current lender will cut you a check and refund your tax and insurance escrow/impound account.
The ‘No Cost’ Streamline FHA Refinance: Who Really Pays?
Since you cannot ‘roll’ closing costs with an FHA streamline refinance loan, either you or the lender (me) have to pay these costs.
Many lenders advertise a ‘no cost’ or ‘no fee’ streamline refinance. A no cost refinance doesn’t mean no costs are involved. It actually refers to a borrower not paying any out-of-pocket expenses at closing.
Of course, most lenders never take the time to explain this and often lead you to believe ‘they’ are paying those or that they arranged for those fees to magically disappear (they lie).
For a lender to execute a no cost FHA streamline refinance, a borrower must accept a slightly higher interest rate and in return, the borrower will receive a lender credit to pay the closing and settlement costs.
Paying closing and settlement costs out of pocket will provide you a lower rate between .125% to .375%. But for most, this ‘no cost’ option is still preferred to writing a check at closing.
Streamline FHA Refinance Mortgage Rates
FHA streamline refinance interest rates are subject to the same market variables that influence other loan mortgage rates. FHA does not control or set the interest rate.
To insure you lock in the lowest FHA streamline refinance interest rate possible, your lender needs to understand the 1oo+ different variables that influence mortgage rates daily and anticipate where they will be tomorrow.
The call center person sitting in a cubicle with a headset on at your too big to fail bank’s call center has no clue how to advise you when to lock your rate. That’s not what they are paid for.
How can you predict mortgages rates tomorrow? Call me and I’ll explain.
Why June 1, 2009 is a Special Day in the FHA Streamline Refinance World
If your current FHA mortgage was endorsed by HUD prior to June 1, 2009, you are not eligible for any type of UFMIP refund when refinancing because HUD only issues UFMIP refunds if you refinance during the first three years.
However, for loans that were endorsed by FHA prior to June 1, 2009, FHA has REDUCED the UFMIP to just 0.01 and the monthly mortgage insurance premium(MIP) is only .55%!
You can read details here: New Reduced FHA Streamline Mortgage Insurance fees
What About FHA Loans Endorsed After June, 2009?
For homeowners who secured their FHA loan after June 1, 2009, you get hosed.
FHA has recently increased the cost of their mortgage insurance…..no bueno. This makes meeting the FHA’s net tangible benefit very difficult. Details can be read here: FHA Increases Mortgage Insurance Fees
But guess what? You may be better off dumping FHA and refinancing into a conventional loan now that private mortgage insurance is lower than FHA’s mortgage insurance premium. Call to do a comparison of FHA vs Conventional if your FICO score is over 680 or 660.