Close your FHA streamline refinance before the end of the year
November 8, 2009 by admin
Homeowners with financing through the FHA and HUD should act quickly if they plan to try to refinance their mortgage and avoid upcoming guideline changes. The Department of Housing Urban and Development (HUD) which oversees the FHA loan program announced in September they would be modifying guidelines with FHA loan underwriting at the beginning of the new year. The announcement comes during a critical time for the mortgage and housing markets. Over the last twelve months FHA mortgages have become extremely popular and have helped fill a major void in the industry in helping to finance first time home buyers and refinance home owners with limited home equity.
HUD has been greatly impacted by the downturn in home values and the surge in property foreclosures. FHA mortgage defaults have jumped to their highest levels in the past twenty years, fueling speculation that HUD would need to turn to the government for a capital injection to help keep the FHA mortgage program solvent. To date, this has been only a source for speculation, but following the continued losses of Fannie Mae and Freddie Mac it’s not hard to imagine that this division of HUD has significant financial challenges. FHA loans presently have the lowest requirements for down payments (3.5%) and are more lenient with credit scoring than conventional home loans, these two factors are major reasons why FHA has gained so much market share in 2009
The pending changes for the FHA mortgage program are going to make it more difficult for homeowners to refinance their existing FHA mortgage loans. Lenders across the country have targeted homeowners with existing FHA mortgage loans with aggressive marketing materials as FHA guidelines typically will allow for a borrower to refinance their mortgage without a home appraisal. This process is called a streamline refinance. The elimination of required home appraisals allow for FHA streamlined loans to close at a significantly higher rate than traditional conventional loans that required home appraisals. It is important to note that borrowers with conventional home loans are not eligible to streamline refinance into a FHA mortgage loan. Streamline home loans are a great avenue for home owners to refinance and lower their monthly house payments and interest rates, with little or no out of pocket expenses. The process is very simple and straightforward and requires half of the normal underwriting time to close. The simplicity of the streamline refinance has helped millions of home owners refinance and save money, who normally would not qualify due to their homes mortgage amount exceeding the present home value. The streamline refinance eliminates this obstacle.
The streamline process for FHA is going to tighten some loopholes in the present process. Including placing seasoning guidelines (the length of time a mortgage is in place prior to being eligible for refinance). These guideline changes have the potential to impact a mortgage refinance for current eligible homewonwers with FHA mortgage loans. The opportunity lock in a great rate and reduce the interest for the life of the loan could be jeopardized if a borrower does not close before the end of the year. Homeowners with FHA mortgage loans should at a minimum contact their existing lenders or FHA approved loan provider and review their present loan scenario to ensure they are in the best possible loan.