How To Avoid “Double Interest” in a FHA Streamline

thCAYFKF2GWhen should you close your FHA Streamline Refinance? At the end of the month — no question about it.

Here is a monthly guide with optimal 2013 FHA Streamline Refinance closing dates. Use these closing dates to minimize your “double interest” paid.

The dates below assumes that your home is a primary residence such that the 3-day right of rescission applies.

  • March 2013 : A Monday, March 25 closing will fund on March 29, 2013
  • April 2013 : A Thursday, April 25 closing will fund April 30, 2013
  • May 2013 : A Friday, May 24 closing will fund May 30, 2013
  • June 2013 : A Monday, June 24 closing will fund June 28, 2013
  • July 2013 : A Friday, July 26 closing will fund July 31, 2013
  • August 2013 : A Monday, August 25 closing will fund August 29, 2013
  • September 2013 : A Wednesday, September 25 closing will fund September 30, 2013
  • October 2013 : A Friday, October 25 closing will fund October 30, 2013
  • November 2013 : A Monday, November 25 closing will fund November 29, 2013
  • December 2013 : A Thursday, December 26 closing will fund December

FHA Streamline Refinance Mortgage Rates

Like most other mortgage rates, FHA mortgage rates have dropped steadily since 2011 and are now near lifetime lows. Refinance activity is up and demand for the FHA Streamline Refinance program remains strong.

If your current mortgage is FHA-insured, see how an FHA Streamline Refinance can help your monthly budget. Qualification hurdles are low, and so are monthly payments. Get started with a presonalize quote now by calling me directly at 951-538-7435

 

 

More FHA Borrowers Find Refinance Outlet

Barclays estimates that mortgages being refinanced from Federal Housing Administration-backing to private-insured loans currently account for about 20% of all FHA refinance activity, according to a recent report.However, improving home prices and increased PMoutletI availability could further open up a refinancing outlet for certain FHA borrowers over time.”This would erode the call protection afforded by mortgage insurance premium protected collateral. It would also provide a boost to discount Ginnie Mae speeds in a rates sell-off scenario,” said analysts Nicholas Strand, Wei-Ang Lee, Sandipan Deb and Rohan Joshi of Barclays

Rising FHA premiums sharply improved Ginnie Mae convexity [sensitivity to interest rate changes], but MIP protection is likely to deteriorate over time driven by a competitive private mortgage insurance market and an improving home price appreciation environment, Barclays noted.“The simple reason for this is: higher premiums increase the attractiveness of other mortgage options that have lower ancillary fees. Specifically, for FHA borrowers that qualify, we believe a conventional loan (with private MI if needed) will become an increasingly viable refinancing outlet over time,” the analysts said

Historic high in FHA mortgage premiums has significantly increased the MIP hurdle in a refinance transaction. As a result, this hurdle is one of the defining factors of the Ginnie Mae prepayment landscape over the past few years, according to Barclays.However, similar to Making Homes Affordable, some of this call protection will erode over time. Given the high costs of an FHA loan relative to a conventional loans with private mortgage insurance, “FHA borrowers have considerable incentive to refinance conventionally,” Barclays stated.There is evidence that FHA to conventional refinances beginning to grow, Barclays said.For instance, PMI originations are rapidly increasing market share relative to FHA. Additionally, the number of FHA loans that refinance is currently outpacing those endorsed, which is another sign of growing FHA-to-conventional refinances, according to the research firm.

 

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Borrowers Struggling to Make FHA Mortgage Payments

A recent article from The Niche Report indicates that during the vertiginous days of the American housing bubble, many borrowers who accepted mortgages on a whim found out the perils of their haphazard actions the hard way. The initial wave of mortgage delinquencies in the United States was felt in 2007, and it mostly involved risky subprime loans. Five years later, a group imagesof homeowners are having a hard time making their monthly mortgage payments -on residential loans insured by the U.S. Federal Housing Administration (FHA).

According to the first quarter report issued by the U.S. Office of the Comptroller of the Currency, the number of FHA-backed loans that were delinquent by more than 90 days increased by 27 percent from January 1 to March 31. This is clearly a cause for concern given the fact that as a government institution, taxpayers have a significant stake in FHA. Other reports indicate that the agency’s financials are far from solid; further deterioration and losses could even require a bailout from the federal government.

Mortgages backed by the FHA have always been a viable option in the American residential lending industry, but there was a time when major lenders and originators shunned FHA mortgages in favor of riskier and more profitable debt instruments. After the bursting of the housing bubble and the subsequent subprime mortgage meltdown, lenders significantly tightened down on their credit and lending guidelines and also looked for the safety net of government guarantees. Fannie Mae and Freddie Mac are two government-sponsored investors who provide guarantees to mortgage lenders; FHA provides similar guarantees that stimulate lending to some applicants who do not meet today’s stringent requirements.

FHA-backed mortgages are far from being a replacement for subprime home loans. There is a clear need for FHA loans these days, and while their lending standards may be lower in comparison to Fannie and Freddie mortgages, the agency has increased requirements since 2009. Not all applicants these days will qualify for FHA loans, and over the last couple of years the agency has increased its minimum credit scores, down payments, mortgage insurance premiums, and underwriting.

This rise in FHA mortgage delinquencies comes at a time when the American economy seems stuck in neutral. Job growth is still stagnant and while median incomes have risen to a certain extent, not everyone enjoys full time employment or job security. The FHA has been looking for ways to increase its reserves and avoid a bailout, but the agency might not survive a second recession

New FHA Refinance Program To The Rescue!!!!

Okay, so starting September 07, 2010, a new refinance program comes in effect.  The program is designed to help  homeowners that make their mortgage payments on time ,but have no equity in their homes.  According to FHA ‘s  six page Mortgage Letter 2010-23, which updates lenders and mortgage brokers on FHA guidelines. Now since sometimes, these guidelines are written in a way that are too confusing , I have  added my interpretation in red letters. So here we go:

  • The homeowner must be in a negative equity position. In plain english. you must be upside down on your house.
  • The homeowner must be current on the existing mortgage to be refinanced. No late payments ALLOWED!
  • The homeowner must occupy the subject property (1-4 units) as their primary residence. It must be the property you live in.
  • The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a “FICO based” decision credit score greater than or equal to 500. According to this guideline, your FICO can be a minimum of 500. This guideline gets trickier since a lot of financial institutions will not accept FHA borrowers with FICO less then 620 regarless of FHA guidelines.
  • The existing loan to be refinanced must not be a FHA-insured loan. Okay so your current loan needs to be a conventional  or subprime loan.
  • The existing first lien holder must write off at least 10 percent of the unpaid principal. Your current lender needs to agree to lower the balance of your current loan by at least 10%.
  • The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Let’s say that you owe $300,000 but your property is worth $150,000, so your new loan can not exceed $146,625.00, which sounds wonderful. Right?..remember your current lender has to voluntarily lower your balance. Hmmm!!! I don’t think your lender will like that very much.
  • Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent.  In other words, if you have a second loan, the second loan can not be added to the new FHA loan, but the combine total of the 1st and 2nd lien CANNOT EXCEED 115% of the current value.
  • FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance. Once again, your need to be current on your mortgage.
  • The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification. So if your mortage has been currently modified, you don’t qualify for this program.

Now after reading the guidelines, it looks like FHA might be heading in the right direction! …Well not so fast!  We all need to remember that at the end of the day, the Lien Holder (current lender) is ONLY encouraged to participate. The Lien Holder has to agree to lower that mortgage balance and that might represent a challenge. Experience will tell us that banks are not willing to lose money. If  the current mortgage loan has to be current with no late payments reported, a Lien Holder might not see the need to lower a balance since the current mortage is in good standing and there is NO financial hardship.  

Now if you ask me, it never hurts to try……. so I will be calling my clients, friends and family to see if this program delivers what it promises!  

 
 
 

 

 

How does a FHA loan looks at a non-purchasing spouse in CA

Many times, when I am consulting couples, an spouse might request NOT to be added in the loan because his or her credit is shot.  In response, I have to inform them that Ca is a community property state. In other words, even though the spouse will not be in the loan, FHA will  require to look at the spouse’s credit and consider his or her debt in order for you to qualify .

According  to FHA underwriting guideline manual 4155.1

  • The debts of nonpurchasing spouses must be included in the borrower’s qualifying ratios. If the borrower resides in a community property state (such as CA), or  property being insured is located in a community property state.
  • The non-purchasing spouse’s credit history is not considered a reason to deny credit. However, the non-purchasing spouse’s credit report that complies with the requirements of HUD 4155.1 4.C.2 must be provided in order to determine the total debt and qualifying ratio. For example, let say that your credit debt is $300.00 per month and your non-purchasing spouse’s debt is $900.00 per month. Under FHA guidelines, the total debt that will be consider is $ 1,200.00. This could mean the differnce between qualifying  for $100,000 or $300,000 house.

If you want to use FHA due to all the advantages that it offers such as low down payment, fixed rates and lower credit score requirements, but you do not want to add a spouse to the loan due to his or her credit issues, you need to consult a mortgage professional that knows FHA guidelines.  In this day and age, couples are being told that they qualify for an FHA loan but the ” individual doing the qualfication” does not known FHA guidelines.  A mistake, such as not knowing that FHA will require a non-purchasing spouse’s credit to be examined, can cost you thousands of dollars and leave you without the dream of owning a home.

Four reason to ask for an FHA Loan

FHa gives prospective home buyers the ability of becoming homeowners. There are lots of reasons to ask for an FHA loan instead of taking a conventional or an expensive and risky sub-prime mortgage loan. Why not take advantage of the many benefits and protections that only come with FHA:

Qualify is easier – FHa does not provide financing. Their job is to insure your mortgage loan, so a lender is more willing to give you a loan with lower qualifying requirements so its easier for you to buy.

Less than Perfect Credit Ok – Even if you have had credit problems, such as medical collections or bankruptcy, its easier for you to qualify for an FHA loan than a conventional loan. For example. FHA might not require , for you, to pay off medical collections in order to qualify.

Low Downpayment – FHA have a low 3.5% downpayment, and that money can come from a family member, employer or charitable organization. Other loans don’t allow this. A conventional loan requires 5%, 10% etc for down payment.

Costs Less – Many times, FHA loans have competitive interest rates because the loans are insured by the Federal Government. Always compare an FHA loan with other loan types.

If you are buying your first home or move-up home, you owe it to yourself to look at FHA.

Less-than-perfect credit is OK

The FHA doesn’t mandate a minimum credit score, according to Vicki Bott, HUD deputy assistant secretary for

single-family housing. Instead, each borrower’s creditworthiness is considered in context. Some leeway is allowed, even for borrowers who’ve filed for bankruptcy.

That said, however, lenders can overlay their own requirements on top of the FHA’s guidelines. Some lenders might require a minimum credit score. Ask prospective lenders about such a requirement if your credit is less than perfect.

“Lenders underwrite FHA loans to ensure that the customer has the willingness and capability to repay the loan, but we do have flexibility beyond pure credit score to look at the borrower’s financial situation,” Bott says.