How To Calculate Maximum Loan Amount Fha Streamline

How Does An Fha Loan Work

FHA loans are a home buying program backed by the Federal Housing Administration.

This agency which is an arm of the Department of Housing and Urban Development uses its FHA mortgage program to make homeownership more accessible to disadvantaged home buyers.

FHA does this by lowering the upfront barrier to home buying.

Reduced down payments and lower credit score requirements make homeownership more accessible to buyers who might not otherwise qualify for a mortgage.

Although FHA loans are backed by the federal government, theyre originated by private lenders. Most major lenders are FHA-approved, so its relatively easy to shop around and find your best deal on an FHA mortgage.

If you have a sub-par credit score, low savings, or high levels of debt, an FHA mortgage could help you get into a new home sooner rather than later.

Other Fha And Conventional Loan Resources

Learn more about your FHA home loan options. If a conventional loan better fits your needs, MoneyGeek can help you learn more about this option, too.

This helpful page details various FHA refinance requirements. It also offers an FHA refinance calculator, which analyzes loan costs and potential savings, helping you decide if refinancing is right for you.

Who Qualifies For An Fha Refinance

FHA refinance loans can be open to those with poor credit, including people with a FICO credit score as low as 500, depending on the type of transaction. The biggest restriction for FHA loans is the maximum loan amount, which is calculated based upon median home prices, says Heck.

If youre looking to refinance, youll probably come across the FHA streamline refinance and rate-and-term refinancing, and will want to understand them before deciding whats right for you. FHA streamline is a form of a limited cash-out, which is the same as a rate-and-term refinance, Heck explains.

If youre eligible for these mortgage products, you may qualify for reduced income and credit documentation requirements, as well as reduced or waived appraisal requirements.

You also may be able to reduce the monthly MIP you pay, Heck says. This all leads to a quicker and easier streamlined process, which should reduce closing costs and headache that is typically associated with the mortgage qualification process. Its also important to note that for an FHA streamline refinance, the original loan must also have been an FHA loan.

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When Should I Refinance An Fha Loan

If interest rates are now lower than what you currently pay on your FHA loan, it may be time to consider refinancing. A good gauge is if you can lower your rate by at least half a percentage point.

An FHA refinance can also be a good idea if you want to get out of paying mortgage insurance premiums. You can do this by refinancing your FHA loan to a conventional loan. Youll need to meet the credit requirements for a conventional loan, however.

Upfront Mortgage Insurance Premiums Vs Annual Insurance Premiums

In addition to upfront mortgage insurance premiums, all FHA loans charge an annual insurance premium. Each premium charges a different percentage on the base loan amount and has specific requirements.

• Upfront mortgage insurance premiums is a one-time charge due at closing. All loan types are charged 1.75% on the base loan amount.
• Annual insurance premiums in most cases are paid over the life of the loan. The percentage youll be charged is dependent on the base loan amount, your down payment amount, and the loan term.

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How Much Does An Fha Refinance Cost Vs Save

How much you stand to save with an FHA refinance and how much it can cost depends on a variety of factors, including current FHA refinance rates and which kind of product you choose.

Refinancing into a lower interest rate and shorter-term product will help you save on interest costs over the life of the loan, Heck says, though it may not lower your monthly payments. He adds that if lowering monthly payments is the goal with a refi, its usually most beneficial to do so in the first three to five years from when you took out the original loan and restart the clock with a similar length of term. The reason: Interest charges are front-loaded into the early years of a mortgage, so you avoid the risk of paying a lot more in interest if you, say, refinance into another 30-year mortgage that only has 20 years left.

Youll also want to evaluate the required mortgage insurance both monthly and over the life of the loan since that can be a significant expense. Closing costs are another factor and will vary according to your lender.

Regarding timing, its smart to shop FHA refinance rates and see how they trend over time. Its always important to shop around to find a lender that suits your needs. This can mean banks or non-banks, which handle the majority of FHA loans.

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Will Refinancing Hurt My Credit Score

Refinancing can temporarily hurt your credit score for a few reasons:

Fha Streamline Loan Borrowers Arent Hindered By Closing Costs

Even though the FHA streamline refinancing program doesnt allow closing costs to be rolled into the new loan amount that doesnt mean borrowers have to pay those fees out of pocket the high demand for FHA loans gives mortgage lenders more leeway to negotiate a lower rate and fee structure. With mortgage interest rates at historic lows, nows the time to refinance your FHA loan and reduce your mortgage payments. Theres no reason to be paying more for your home loan than necessary and that includes closing costs to refinance.

Tim Lucas

Editor

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Fha Streamline Mip For Loans Endorsed On/after June 1 2009

If you are refinancing an FHA mortgage via the FHA Streamline Refinance program and your;existing FHA mortgage was endorsed on, or after, June 1, 2009, your mortgage insurance premium schedule on your new FHA loan is as follows.

Upfront Mortgage Insurance Premiums

For an FHA Streamline Refinance replacing a loan endorsed on, or after, June 1, 2009, the FHA upfront mortgage insurance premium is equal to 1.75 percent of your loan size, or 175 basis points.

This is $1,750 for every $100,000 borrowed. The FHA automatically adds the $1,750 premium to your loan balance for you its not paid as cash.

However, not all refinancing households will pay;the full amount.

As shown in the chart above, those using an FHA Streamline within three years of their original loan stand to get an upfront MIP refund.

This can significantly lower the amount of UFMIP added to your new loan, thus reducing the amount you have to pay overall.

Annual Mortgage Insurance Premiums

The annual MIP schedule for an FHA Streamline Refinance which replaces a loan from on, or after, June 1, 2009 is as follows;:

• 15- & 30-year loan terms withan LTV over 90 percent: 0.85% annual MIP, payable for the lifeof the loan
• 15-& 30-year loan terms with an LTV under 90 percent: 0.85% annualMIP, payable for 11 years

Note that these MIP costs may belower than what youre paying on your existing FHA home loan.

Fha Loan Rules Updated: Maximum Loan Amounts For Streamline Refinancing

The FHA and HUD have updated some of the rules used to calculate maximum mortgage loan amounts for FHA Streamline Refinancing loans. According to Mortgagee Letter 2013-29, there are new guidelines to lenders on how the maximum amount is calculated, and what can be included in the loan amount when calculating the mortgage amount.

Mortgagees are reminded that when processing an FHA-insured streamline refinance mortgage, the new maximum mortgage amount must always be calculated starting with the outstanding principal balance on the existing mortgage, not with the payoff amount for the existing mortgage.

Borrowers should know the difference between the outstanding balance and the payoff amount. According to the Consumer Financial Protection Bureau official site, Your payoff amount is how much you will actually have to pay to satisfy the terms of your mortgage loan and pay off your debt.

How does the payoff amount differ from the outstanding balance? According to CFPB, Your payoff amount is different from your current balance, which is the amount you owe as of the date of your statement. Your payoff amount also includes the payment of any interest you owe through the day you intend to pay off your loan, and it may include other fees you have incurred and not paid.

For more information on how these changes may affect a Streamline Refinance loan you want to apply for, contact the FHA directly by calling 1-800 CALL FHA.

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Mortgage Lenders And Streamline Refinance

Many different banks and mortgage lenders offer streamline refinancing opportunities for qualified customers. That being said, it is important to differentiate between a lender’s own refinance products and those associated with the FHA, VA or HARP. Not every bank is licensed to offer these types of mortgage products, and it may be necessary to review a variety of lenders before finding the one that best suits your situation. Some may have more experience with FHA or VA refinance, while others may specialize in HARP loans. It is also worth noting that approval for any of these programs is entirely left to the discretion of the lender, so it may be necessary to shop around before finding a bank, credit union, or other mortgage lender that can offer the most suitable refinance product for your specific situation.

While streamline refinancing through the FHA, VA, and HARP programs provides an easier path to a new mortgage, it does not necessarily guarantee lower interest rates or reduced loan costs. In some instances it may be more beneficial to go with a traditional refinance, even though the process of application can be more time consuming. As with any mortgage product, it is important to review your options and look for a lender who can offer a refinance package that will that will do more than simply save time, but will also save you money over the life of your new loan.

Eight Factors To Help You Qualify

Lenders understand that some things are simply out of your control, but there are several things you can control and you should be mindful of them when you’re waiting to qualify or close on your FHA loan.

• Don’t make any random deposits into your bank accounts, and document each one when you make a deposit.
• If you have more than one bank account, don’t transfer big amounts between them. Keep most of your money in one account if possible.
• Wait to buy a new vehicle or to upgrade to a bigger lease.
• If you get a cash gift, remember to fill out your gift paperwork before you accept it.
• Don’t quit or switch jobs in the middle of the loan process. You want lenders to see you as a good choice.
• If you work at a salaried job, don’t switch to a heavily-commissioned job. Remember, your loan paperwork is based on your previous income from your salaried position.
• Don’t fall behind on your bills or miss payments, even if you’re currently disputing them.
• Even if you get 20% off, don’t open any new credit cards. This can skew your credit utilization ratio, and it can make your credit score drop.

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Fha Doesnt Allow Closing Costs To Be Added To A New Refinance Loan

Many mortgage loans like a conventional refinance or FMERR allow borrowers to finance closing costs into the new mortgage refinance loan to reduce out-of-pocket expenses. The rules for loans backed by the Federal Housing Administration are a little different. The maximum loan amount for an FHA streamline refinance is calculated by subtracting the FHA MIP refund from the current unpaid principal balance, then adding the new upfront MIP costs.

+ = New maximum loan amount

FHA streamline refinance maximum loan calculation

For example, assuming a current FHA loan closed 12 months ago with a current loan balance of $150,000, the new loan amount would be as follows:

• Current balance: $150,000
• Upfront MIP refund due to borrower: $1,522
• New upfront MIP due: $2,625
• Max new loan amount: $151,103

The new maximum loan amount does not include an allowance for closing costs. For an FHA streamline refinance, typical closing costs range between $1,500 and $4,000. Though, closing costs can vary widely depending on the lender, borrower characteristics, and the loan amount.

The good news is that you dont always have to pay these closing costs out of pocket.

Fha Net Tangible Benefit Calculator

The Federal Housing Administration updated the underwriting criteria for the FHA streamline loan program on April 18, 2011.The “net tangible benefit” is the most noticeable improvement.

New streamline loans originated after April 18, 2011 must show a 5-fixed-ratepercent reduction in the principal and interest of the mortgage payment plus the annual mortgage insurance premium , or if refinancing from an Adjustable Rate Mortgage to a fixed-rate mortgage, the interest-rate must be reduced by at least 2 percent or be no higher than the current interest-rate.The FHA Benefit Calculator will determine whether or not the new streamline loan meets the net tangible benefit criteria. Mortgagee Letter.pdf is a PDF file that you may download and print. Please send me an email if you discover a mistake, have a comment, or want to make a purchase.9/2018 was the most recent update.

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Streamline An Fha Loan

1

Locate your original FHA loan file, including your application, title insurance policy, and conveyance documents, including the. The FHA streamline process will reuse most of this paperwork, saving you time and money.

2

Verify that current interest rates are lower than your existing FHA loan interest rate. You can only streamline if you will lock in a lower interest rate.

3

Identify several HUD-approved mortgage lenders in your area. The reference link provided below can lead you to approved lenders in your area.

4

Contact at least three HUD-approved lenders to obtain a good faith estimate on streamlining your FHA loan. Lenders do not always charge equal closing costs and transaction fees, so contacting several approved lenders can help you to identify a low-cost provider.

5

Select a lender and provide him with your original FHA loan application. Because of the streamline process, your lender will have very little work to do and you should be able to close on your new loan within about one week.

6

Attend a closing with your lender. This is where you will sign new documents, including a new promissory note and mortgage, sometimes called a “deed of trust” instead of a mortgage.

References

Get Current Fha Loan Rates

For your convenience current FHA loan rates are published below. You can use these to estimate your mortgage interest rates and payments.

To better compete with government insured loans, both of the major GSE have launched low downpayment loan options.

Freddie Mac has a Home Possible loan program which allows down payments as low as 3% to 5%, while Fannie Mae offers a HomeReady loan program that requires a 3% down payment.

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