How Douglas County Residents with FHA Mortgages can Refinance without an Appraisal
If your current mortgage is a FHA loan, you may be eligible for rate reduction refinance that could save you thousands without having to get an appraisal or pay for traditional closing costs. It’s true. The Federal Housing Administration (FHA) offers existing FHA mortgage holders a streamline refinance that doesn’t require an appraisal.
Requirements for FHA Streamline without Appraisal
- Must have current FHA mortgage
- Must have a credit score of 640
- Cannot be delinquent on the mortgage in the last 12 months
- Be able to support the debt ratios of 31% for housing and 43% for combined debts with verified income from acceptable sources
- Total housing payment must be reduced by 5%
- Current mortgage must be 6 months old
- Must occupy the property as your primary residence
Loan Amount Calculations and Costs Involved
If you have had your FHA mortgage for 3 years or less, FHA will refund you a prorated portion of upfront mortgage insurance premium (UFMIP) they had originally charged you. Then they will recharge you the fee on the streamline refinance at a rate of 2.25% of the new loan amount. Here’s how the new loan amount is calculated:
The maximum base mortgage cannot exceed:
- • Unpaid principal balance
- • Plus the interest charged by the servicing lender when the payoff will not be received on the first day of the month, but may not include delinquent interest, late charges or escrow shortages.
MINUS
- • The unearned UFMIP (from FHA refinance Authorization or appropriate UFMIP Refund Schedule)
This gives you the maximum base mortgage
PLUS
- • New UFMIP at 2.25% giving you the new loan amount
IMPORTANT TO NOTE
Closing costs, pre-paid expenses and discount points, late changes and escrow shortagesmay not be finance into the new loan. In other words, no closing costs or set up of escrow can be financed into the new loan amount. They have to be paid at closing.
FHA Mortgages over $200,000 May Qualify for Typical Closing Costs to be Paid
Excluding FHA’s UFMIP, if your current FHA Mortgage is over $200,000, your typical closing costs can be paid by your lender. These closing costs include lender, title and recording fees on any loan can range from $2,500 – $3,000. These are paid through the interest rate of the loan. For example, if you were to pay for the closing costs your interest rate might be .25% cheaper but having the lender pay for these costs raises the rate to cover them.
Example of a FHA Streamline without Appraisal with Typical Closing Costs Paid
Let’s say your current FHA loan is a 30 year fixed, has interest rate of 5.75% with an existing balance of $250,000 the principal and interest payment would be roughly $1,479.38 per month.
Let’s further say you’ve had your loan for 1 year and your unearned UFMIP refund is $3,000. You’d subtract that from the $250,000 giving you $247,000. The new UFMIP is charged at 2.25% or $5,625 gets added to the $247,000 for a total loan amount of $252,625. Obviously, the UFMIP adds $2,625 to your existing mortgage. But the rest of the closing costs are paid. Is it worth it?
Do these numbers make sense?
A rate reduction to 4.5% gives you a new principal and interest payment of $1,280.01. That’s a monthly savings of $199.35 or $2,392.20 per year or over $60,000 over the life of the loan. In just a little over 13 months, you’d break even on the $2,625.
Now watch this. If you were to take the new payment ($1,280.01) in the above example and apply the savings to new loan, essentially making the same payment ($1,479.38) you were before the refi, you’d reduce the term to 22.77 years. Subtract that from 30 years and it saves you 7.23 years.
But in the above example, you paid 1 year already. So over all you’d be saving you 6.23 years or roughly 75 payments of $1,479.38 for total of $109,419.75. Would you pay $2,625 to save over $100,000 GUARANTEED? I would.
But What If You Only Want To Be In Your Home For Five Years
Does it still make sense? Let’s review the numbers. Without refinancing, the original loan at 5.75 would reduce the loan balance to roughly $230,807 in more 5 years.
Paying the minimum payment of $1,280.01, the new mortgage would reduce the balance to around $230,287.69, plus you would save $199.35 for 60 months or $11,961 a total saving of over $12,000. However, if you were to apply the $199.35 to the new payment you’d reduce the balance to $216,901 for a savings of close to $14,000.
Imagine walking away with an additional 14k when you sell your house.
Take Action Now
To take advantage of today’s low rates, simply fill out our secure online form and within 24 hours you’ll receive a free no-obligation rate quote on your existing FHA mortgage loan having the typical closing costs paid. You can also pick up the phone and call 720-515-8654 to speak with me immediately. Or drop by our office location near I25 and C470 at 9360 Teddy Lane, Suite 203. Take Action Now.
