The FHA Streamline Refinance program has been a fantastic option for borrowers to refinance without an appraisal, low or no closing costs, and less paperwork than normal. For people that don’t want to deal with changing their home loan, but are looking to save money, the FHA Streamline Refinance has been a perfect solution. The good news for borrowers is that FHA loans will continue into 2013. HUD has confirmed that FHA loan limits will remain the same into 2013 and that the program will remain intact.
While the FHA Streamline Refinance program is available, and interest rates are low, mortgage insurance premiums (MIP) may rise. Congress passed the The Federal Housing Administration Fiscal Solvency Act of 2012 which gives the FHA the authority to raise its mortgage insurance premiums as high as 2.05% a year. This would be an increase of .85% and represent hundreds of dollars in increased cost to borrowers on a yearly basis. In 2008 the MIP rate for FHA was only 0.50% and they have been steadily raising it ever since, for a total of 4 times in the past 4 years. The Federal Housing Administration has had to raise MIP to keep up with their expected reserve requirements. They now need to have $2 on hand for every $100 they insure. In November of 2011 they only had $0.24, a $1.76 shortfall. In order to increase their on hand reserves, they have resorted to raising the MIP that borrowers pay.
Using historic trends it is safe to assume that FHA will continue to raise rates until at the full 2.05%. Borrowers that want to take advantage of low interest rates, and lower MIP rates, should complete an FHA Streamline Refinance now before any further increases take place. A combination of climbing interest rates and MIP could cost hundreds on a monthly basis and significantly decrease a families disposable income. FHA lenders can work quickly to refinance your loan so that you can start 2013 with a low mortgage payment, before any of the changes take place.
FHA Streamline Refinance Qualifications
- Have an FHA mortgage loan right now.
- Be current on your mortgage (not paying late).
- You should live in the home (not a rental property)
Mortgage lenders may have their own set of underwriting requirements but the goal of the FHA Streamline Refinance program is to lower your interest rate and payment, with a fixed rate mortgage loan. This program can help homeowners who have adjustable rate mortgages (ARM) or a higher interest rate than what is currently being offered. An added bonus of this program is that it often does not require an appraisal, welcome relief for homeowners whose value has declined.
To start the application process speak with an FHA approved lender to see what current interest rates are and find out how much you can save. After receiving your full application and income documentation a mortgage banker can work diligently to complete your refinance before the MIP is increased again.