What is the "FHA Streamline Refinance Program"?

The FHA Streamline Program is designed to lower the monthly principal and interest payments on a currently HUD-insured mortgage and must involve no cash back to the borrower. No new Appraisal is required nor debt-to-income (DTI) qualifying, only that a borrow is gainfully employed at the time of application and has ongoing employment.

How Can Streamline Mortgage Offer a No-Borrower-Paid-Cost Refinance?

Your existing lender services your FHA loan, they do not own the loan; – they service it for the investor. Loan servicers are really just a bookkeeper for you and the investor. Servicers receive a monthly fee for keeping the books. They receive approximately 3/8% monthly for depositing your twelve checks each year, paying your taxes and your hazard insurance and properly applying your payments against your loan. This servicing fee is very profitable and desirable. When your loan transfers from the originator to the loan servicer a fee is paid that is called the “SERVICE RELEASE PREMIUM (SRP)”. We pay the escrow, title insurance, and all other third party expenses in your transaction. We offer our loans to the public using a “Wholesale to the Public” pricing policy. We deal in tremendous volume using technology to keep our internal costs to a minimum and then pass along our savings to our customers. We are willing to compete for your business and believe our fees are the lowest in the industry. Streamline Mortgage is a privately owned California corporation headquartered in the City of Tustin located in Orange County. Since we were formed in 1999, we have closed over 21,865 FHA Loans in California making us EXPERTS in FHA Home Refinance! Contact one of our specialists today to get started!

What Does FHA Think About Streamline Process?

FHA invented the streamline process and encourages homeowners to take advantage of it whenever possible. FHA is like any insurance company; whenever they can reduce the risk they will make more money. FHA insures the loan for the benefit of the investor who owns your loan.  The streamline rate reduction program benefits the homeowner by reducing their monthly payments and interest paid. Your loan terms remain the same; it is still assumable and there is no prepayment penalty with any FHA loan.  Whenever interest rates come down you can take advantage of this program- and yes you can streamline as many times as the market will allow.

What is FHA's Rule of Seasoning?

It is FHA’s rule that at the time of loan application, the borrower must have made at least 6 payments (211 days) before they may refinance.

I Have Owned my Home for Less Than a Year, Can I Refinance?

Yes, for mortgages with less than 12 months payment history, the borrower must have made all mortgage payments within the month due. You are eligible after you have made six months payments and 211 days have passed from the date that you purchased.

What is FHA's Rule of a Net Tangible Benefit?

The New Principle & Interest Payment + Monthly Mortgage Insurance must be at least 5 percent lower than existing Principle + Monthly Mortgage Insurance being refinanced. This rule applies to fixed rate transactions to new fixed rate transactions. *If you have a variable rate, please contact one of our loan specialists for your specific guidelines.

With This Re-Finance is There a New Verification of Income and Employment?

Yes, the new Lender must certify that the borrower is employed and has income at the time of application. If there are multiple borrowers on an application, only one must be gainfully employed. However, there is no recalculating of a debt-to-income (DTI) ratio with the new loan.

What Credit Score is Needed for This Streamline Refinance?

For our Traditional Streamline Refinance, the minimum middle credit score for a qualifying borrower is 580. The three nationwide consumer reporting agencies are Equifax, Experian and TransUnion. 

Any borrowers on the existing insured FHA loan must remain on the new loan and have their three bureau credit score run. Interest rates are not the same for everyone, but instead are based on risk-based-pricing.

We are always happy to examine your specific profile(s) free of charge and will offer guidance to get you the rate deserved.

Can I Skip Up To 2 Mortgage Payments?

Yes. Borrowers must be current on the mortgage being refinanced for the month due prior to the month in which they close the refinancing and for the month in which they close. For example, if you are  closing on April 8th, you must have paid the March payment within the month of March. In this case. together we must make the April interest payment by closing. Effectively two months of interest (typically 60 days) would then be financed into the new loan and added to the principle balance.

If the payment for the current month has been made then 30 days of interest would be financed.

Mortgage Payments do not have to be skipped and can also be paid early to minimize adding to the principle balance of the new loan.

The first payment on the new loan will be due 30 days after the last day of the month closing.

Is a New Appraisal Required?

No. Under this FHA Streamline Program no New Appraisal is required.

Is there a Prepayment Penalty?

No. FHA loans never have a prepayment penalty.

Is my FHA loan Assumable?

Yes FHA loans are Assumable to a Qualified Borrower. This means in the future should you decide to sell your home, a prospective buyer could assume your remaining term and existing interest rate. In the event interest rates rise and the economy is better, this low rate could help your home sell faster and potentially for more money.

Will Rates Go Down Or Up?

You never know where the bottom is until you miss it.

If you are reducing your principal and interest with little or no cost, why wait?

If you do have costs in the transaction, be sure that you can completely recover the cost in a reasonable timeframe. Most advisors state that all costs should be recovered within two years. The sooner that you can recover the costs, the better.

Consider using free’d up savings back against the principle. With our Streamline Refinance transactions you can use the savings to repay the owing balance much faster than you would have otherwise thus reducing the original term significantly. *If you would like a custom amortization schedule showing the difference and a plan, just ask and one of our Loan Officers customize it for you!

A don’t forget there is Never a Prepayment Penalty with any FHA Loan.

How do I proceed?

Easy. Grab a current mortgage statement or go online for the current loan overview and give us a quick call. The items we need are listed within the free estimate form on the right.

A loan officer will answer your questions and send you an Estimate on the next business day. From here we will work hand and hand though loan closing on your new and improved FHA Loan!

What Documents Must I Provide?

You must provide a copy of Government Identification for each borrower on the existing loan (Ex. Drivers License, Passport, Green Card). You must also provide a copy of the Social Security Card(s) for each borrower on the loan.

What is Monthly Mortgage Insurance (MMI)?

Monthly Mortgage Insurance (MMI) is a premium paid to FHA for insuring a FHA Loan. It is collected monthly within a FHA borrowers escrow payment (when required). The premium is calculated on the average outstanding principle balance for 1 year forward (using regular principle payments in the amortization).

The factor used to calculate the premium depends on the FHA Case Assignment Date and the rules as of that date.

When the minimum down payment of 3.5% is used to purchase a home with a typical 30 Year FHA loan, the Newest MMI factor is now set at 85 basis points .

For borrowers who closed on an FHA loan on or after June 3rd 2013, but before February of 2015, the premium is between 130 – 135 Basis Points on a base loan amount up to $625,499 For base loan amounts in the same time frame over $655,000, the MMI is set at 150 – 155 Basis points (for a 30 year term).

FHA had a policy change on January 26th, 2015 and reduced the MMI factor by 50 basis points on all new insured transactions, This is one of the best benefits of a new FHA Streamline Refinance.

Common names for the FHA insurance premium found on mortgage statements.  are; “MIP” (Mortgage Insurance Premium), “PMI” (Private Mortgage Insurance) , “Department of HUD  Distribute”, & “HUD PMI”.

We are experts at determining new MMI eligibility.

Did the Monthly Mortgage Insurance (MMI) Go Down?

Yes. If your FHA Loan began after April of 2013, your Monthly Mortgage Insurance (MMI) factor can be reduced by 50 Basis Points or Half A Percent. This is the equivalent of reducing your Note interest rate by .5%.

You must obtain a new FHA Case Number though a new Insured Transaction to adjust the Mortgage Insurance Factor and lowered annual premium.

If your loan closed prior to April of 2013, please contact our office to discuss.

What is Up Front Mortgage Insurance (UFMIP)?

Up Front Mortgage Insurance (UFMIP) is an insurance premium paid to FHA. It is in addition to Monthly Mortgage Insurance (MMI) and is not collected as part of the Escrow Payment. Instead UFMIP is financed into the loan.

UFMIP is consumed over 36 months of which 20% is used in the first month of the new loan. The remaining 80% is spread evenly over the following 35 months.

Today the factor is 1.75% for any new FHA transactions who’s previous FHA Endorsed Transaction on or after May 1st 9th, 2009.

With A New FHA Loan Do I Get Credit For Unused Mortgage Insurance Paid to FHA?

If you have an FHA Transaction that has closed in the last 36 months you likely have credit remaining for the unused portion of Up Front Mortgage Insurance (UFMIP) financed. This credit can be applied against the new UFMIP to reduce the new premium calculated at 1.75% of the total new loan amounts base. This credit is commonly referred to as a “refund” however it is not returned by FHA in cash.

We are experts in calculating the remaining credit and are happy to explain in great detail. Give us a call or submit your question on the contact page.

How do I Cancel My FHA Mortgage Insurance?

Paying off the FHA Loan 100% or knowing the specific rules FHA has for your specific insured transaction is the only way to know when your required insurance premium can stop.

Contact our offices for specific information pertaining to your unique transaction.

 

Here is information directly from FHA;

The information displayed in the Loan Balance at Final MIP Date and Final Monthly MIP Payment Date fields depends on the following:
FHA Case Number Assigned on or after June 3, 2013
FHA Case Number Assigned before June 3, 2013 and Closing Date after December 31, 2001
 

FHA Case Number Assigned on or after June 3, 2013: Per Mortgagee Letter 2013-04, the duration of monthly (annual) mortgage insurance premium (MIP) payments is based on the amortization term and loan-to-value (LTV) ratio at loan origination as follows:

Term LTV at Loan Origination Monthly MIP Payments
Less than or equal to 15 years Less than or equal to 78% 11 years
Less than or equal to 15 years 78% to 90% 11 years
Less than or equal to 15 years Greater than 90% Loan term
Greater than 15 years Less than or equal to 78% 11 years
Greater than 15 years 78% to 90% 11 years
Greater than 15 years Greater than 90% Loan term
The Loan Balance at Final MIP Date is displayed as N/A (not applicable). The Final Monthly MIP Payment Date is either 11 years from the date of insurance endorsement or the date of loan maturity (i.e., date the last monthly MIP will be assessed).
FHA Case Number Assigned before June 3, 2013 and Closing Date after December 31, 2000: Monthly mortgage insurance premium (MIP) payments are made until the unpaid principal balance reaches 78% (or 22% equity) for cases under the Mutual Mortgage Insurance (MMI) fund that meet the eligibility requirements described in Mortgagee Letter 2000-46. (This threshold amount, displayed in the Loan Balance at Final MIP Date field, will be reached at the month/year displayed in the Final Monthly MIP Payment Date field.) In addition, for mortgages with terms of over 15 years, borrowers must pay monthly MIP at least five years from the beginning of amortization, regardless of when the 78% threshold is reached.
For cases with loan-to-value ratios below 78% or if the borrower has made a large down payment, the message Mortgage Amount is less than 78% of the Property Value will be displayed in place of the Loan Balance at Final MIP Date value. In these situations, the borrower is still required to pay monthly MIP for at least five years if the mortgage term is more than 15 years.

 

If your FHA Case Was Assigned Before April 1st, 2012;

The FHA insurance payments include two parts: the upfront mortgage insurance premium (UFMIP) and the annual premium remitted on a monthly basis – the mutual mortgage insurance (MMI). The UFMIP is an obligatory payment, which can either be made in cash at closing or financed into the loan, so that you really pay it over the life of the loan. It adds a certain amount to your monthly payments, but this is not PMI, nor is it the MMI. When a homeowner purchases a home utilizing an FHA loan, they will pay monthly mortgage insurance for a period of five years or until the loan is paid down to 78% of the appraised value – whichever comes later. The MMI premiums come on top of that for all FHA Purchase Money Mortgages, Full-Qualifying Refinances, and Streamline Refinances.

When we talk about canceling the FHA insurance, we talk only about the MMI part of it. Unlike other forms of conventional financed mortgage insurance, the UFMIP on an FHA loan is prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the UFMIP paid at loan inception. If you have financed the UFMIP into the loan, you cannot cancel this part. The insurance premiums on a 30-year FHA loan must have been paid for at least 5 years. The MMI premium gets terminated automatically once the unpaid principal balance, excluding the upfront premium, reaches 78% of the lower of the initial sales price or appraised value.

A 15-year FHA mortgage annual insurance premium will be cancelled at 78% loan-to-value ratio regardless of how long the premiums have been paid. The FHA’s 78% is based on the initial amortization schedule, and does not take any extra payments or new appraisals into account. This is the big difference between PMI and FHA insurance: the termination of FHA premiums can hardly be accelerated.

Borrowers who do make additional payments towards an FHA mortgage principal, may take the initiative through their lender to have the insurance terminated using the 78% rule, but not sooner than after 5 years of regular payments for 30-year loans. PMI termination, however, can be accelerated through extra payments or a new appraisal if the house has appreciated in value.

How do I remove my FHA Monthly Mortgage Insurance? (Also known as PMI, HUD MMI)

There are several scenarios to consider, and a qualified loan professional will best guide you through the matrix.

First and foremost, the name of the game is “Equity” (percentage of ownership). With traditional conventional financing though the two biggest investors, “Fannie Mae” & “Freddie Mac” (government sponsored enterprises), you will need to have 20 percent equity or more. Equity can only be determined by a current appraisal of your property’s value against what you owe on all associated loans.
Next, a borrower’s Debt-to-Income (DTI) must be considered. DTI will be calculated from all open liabilities (debt’s) against all assets. A maximum Debt-to-Income Ratio of 45% may be considered. This rate must be computed by a loan professional and will be submitted to Fannie Mae’s electronic decision system known as “Direct Underwriting” (DU).

Finally, a borrower’s lending history is analyzed. A middle credit score of the three primary bureau’s (Equifax, Experian & TransUnion) is one factor utilized. The next major deciding factor is concerning past debts and if they have been paid on-time. Note that a Bankruptcy, Short-Sale or Foreclosure are all significant events that may prevent qualification per Fannie Mae or Freddie Mac. Please consult with a loan professional as these guidelines change often.

Know that Conventional rates are often ½% higher (on average) than of comparable 30 years fixed FHA market rates. Since FHA Loans are 100% insured, the investor has limited risk whereas the conventional loan must build the danger into the pricing.

 

Let us help you decide. Call our loan officers today!

This data is for informational purposes only and is not a commitment to lend.

How Are California Property Taxes Calculated?

When real property is purchased, the county assessor assigns it an assessed value that is equal to its purchase price, or “acquisition value.” Each year thereafter, the property’s assessed value increases by 2 percent or the rate of inflation, whichever is lower.

Your tax bill is unique to your purchase and is not the same as the prior owner. In the first year of home ownership, the county assessor brings your taxed value up or down depending on the difference from the prior owner.

Please see the next section “What are Supplemental Property Taxes” to understand the process better.

What Are Supplemental Property Taxes?

Supplemental Taxes are interim or in-between tax bills for the difference in value from the prior owners taxed value and the new owners acquisition value taxed.

Generally if you paid more than the prior owner, you will have a higher tax bill. The prior owners bill continues to run with the property and is know as a “Secured Tax Bill”. It is an annual calculation collected in two equal parts in November & April each fiscal year and is sent to the lender of record on FHA loans. The county tax assessor will re-assess your taxes and will issue brand new Secured Tax Bills specific to your area and acquisition price.

When your lender receives a Secured Tax bill for your property, they pay the county directly from the escrow/impound account or  from the “Escrow Balance” (referenced on a mortgage statement).

The Supplemental Tax Bill is NOT send to the lender of record as it is the borrowers responsibility to pay.

The new Secured tax bill will be calculated using the prior owners value and the additional full year value determined by a supplemental assessment. Add the two together and it will add up to the new Secured bill. Divide by 12 and this is the amount you need to save monthly in the escrow payment.

If you paid less than the prior owner, you may have Negative Supplemental Taxes refunding for overpaid taxes. A new secured bill will be calculated using the same method described above but subtracting value.

Did You Receive Multiple Supplemental Tax Bills? 

On July 1, 1983, California State law was changed to require the reassessment of property as of the first day of the month following an ownership change or the completion of new construction. In most cases, this reassessment results in one or possibly two supplemental tax bills being sent to the property owner in addition to the annual property tax bill.

Typically, new construction is any substantial addition to real property (e.g. adding a new room, pool, or garage) or any substantial alteration which restores a building, room, or other improvement to the equivalent of new (e.g. completely renovating an outdated kitchen).

Most changes in ownership caused by the sale of property result in reassessment. However, interposal transfers, the transfer, sale, or inheritance of property between parents and their children, and the addition of joint tenants do not result in the reappraisal of property.

The County Assessor first determines the new value of the property based on current market values. The Assessor then calculates the difference between the new value and the old value (set on January 1st of the previous fiscal year).The result is the supplemental assessment value. Once the new assessed value of the property has been determined, the Assessor will send a notification of the amount.

This reassessment usually results in an increase in property value, in which case the supplemental taxes will be calculated by the Auditor-Controller based on the change in value, and one or possibly two supplemental tax bills will be created and mailed to you by the Tax Collector.

You are only taxed on the supplemental value for the portion of the current fiscal year remaining after you purchased the property or completed new construction.

 

We are experts on California Property Tax calculation on FHA Home Loans.

Why Did I Receive An Escrow Refund?

The United States Department of Housing and Urban Development (HUD) and the Real Estate Settlement Procedures Act (RESPA) requires a FHA loan servicer/lender to conduct an Escrow Analysis each year. The lender is to provide an Annual Escrow Account Disclosure Statement and must analyze any changes in Hazard Insurance, FHA Monthly Mortgage Insurance and Property Taxes.

The PROBLEM California home owners face is  it takes time to get their unique tax bill created in the first year of home-ownership. Each of the 58 CA counties must re-assess a properties value based on what was paid, any municipal or ad valorem fees. The former owners Secured tax bill continues to run with the property and is sent to the lender of record for payment. Often the new lender assumes this is the total tax bill and prematurely re-assesses the Escrow Payment. They then determine a surplus of escrow savings and return funds to the homeowner.

Unfortunately this is a very common scenario for new home owners.

The Good News is that we here at Streamline Mortgage can help get the impound account/escrow balance corrected and avert the major compounding shortage. We have several solutions to get the Escrow back in the black without necessarily making you go out of pocket.

Why Did My Lender/Loan Servicer Raise My Escrow Payment?

The United States Department of Housing and Urban Development (HUD) and the Real Estate Settlement Procedures Act (RESPA) requires a FHA loan servicer/lender to conduct an Escrow Analysis each year. The lender is to provide an Annual Escrow Account Disclosure Statement and must analyze any changes in Hazard Insurance, FHA Monthly Mortgage Insurance and Property Taxes.

The PROBLEM California home owners face is  it takes time to get their unique tax bill created in the first year of home-ownership. Each of the 58 CA counties must re-assess a properties value based on what was paid, any municipal or ad valorem fees. The former owners Secured tax bill continues to run with the property and is sent to the lender of record for payment. Often the new lender assumes this is the total tax bill and prematurely re-assesses the Escrow Payment. They then determine a surplus of escrow savings and return funds to the homeowner.

Unfortunately this is a very common scenario for new home owners.

The Good News is that we here at Streamline Mortgage can help get the impound account/escrow balance corrected and avert the major compounding shortage. We have several solutions to get the Escrow back in the black without necessarily making you go out of pocket.

Can I Refinance, Replace My Escrow Balance/Impound Account & Get A Refund?

Yes you may replace impounds (a.k.a. Escrow Balance/Property Bills Due at close) with the Streamline Refinance granted we meet FHA’s rule of Net Tangible Benefit (described in the “Common Questions” tab in this section).

A selected interest rate may have fantastic credits and can carry enough credit to cover new impounds + closing costs. Furthermore if the desired benefit can only be reached using a slightly higher interest rate, no problem as it is the borrowers choice.

Let us work the numbers and show you what you can save.

This is a great way to free up additional capital!


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