FHA Loan Articles

News, updates, and explanations to keep you informed. per http://www.fha.com/fha_article.cfm?id=27

FHA Streamline Loan Requirements

FHA Streamline loans can help homeowners lower monthly mortgage payments and interest rates. But what do you need to qualify for an FHA Streamline loan? To begin, you need an existing FHA mortgage—if you don’t have an FHA loan but want to refinance, your options include conventional refinancing or applying for an FHA refinancing loan.

If you have a conventional loan you wish to refinance with an FHA refinancing loan, you’ll need to apply with the usual credit check, employment verification, debt-to-income ratio requirements and other considerations. An FHA Refinancing loan can get you many of the same results—if you refinance from a conventional loan to an FHA-insured refinancing loan you may get better rates and lower payments.

For those who do have an FHA home loan, the other requirements for FHA Streamline include:

Being current on the existing loan with all mortgage payments made on time for the last year.

You must own the original property for at least six months before you can qualify for refinancing.

To refinance you’ll need an FHA-approved lender. If you don’t want to use your current lender, any bank you choose must be FHA approved.

FHA Streamline loans do not require an appraisal, but a no-appraisal loan cannot exceed your current loan.

Closing costs must be paid up front or arranged for through a “no-cost” FHA Streamline loan. You may also choose to include the closing costs into your loan a “with appraisal” FHA Streamline loan. In these cases you must have enough equity in the home to cover the extra amount.

There is another Streamline product made for those who want a refinancing plan to help them modify or improve the home. This is known as an FHA Streamline 203(k) Loan. The 203(k) is similar to ordinary Streamline loans with a few exceptions.

The 203(k) has a minimum of $5,000. The maximum loan amount is $35,000. This amount is added to your mortgage for weatherizing your home, removing lead paint and many other home improvements that don’t involve major alterations of the home.

You are required to use at least one contractor to do the repair work. Self-help renovations are not allowed unless the borrower can prove they have proper expertise.

When choosing a contractor, FHA guidelines state you must get an estimate which is broken down into specifics regarding the costs of each project. Contractors must sign an agreement to do all the work included in the estimate for the amount and within the time specified.

You must obtain all permits required by law.

There are restrictions on 203(k) Streamline refinancing loans. You cannot use the 203(k) loan to do major structural repairs such as altering a load-bearing wall or work that needs architectural plans. If your home improvement work exceeds $15,000 the FHA requires you to have a third-party inspection after the job is done.
You are permitted to make two payments to each contractor. If you do the work yourself as a qualified builder, the same rule applies.

When borrowing under the FHA Streamline 203(k) program you must “close out” the loan when the work is complete. According to FHA.gov, you may be required to furnish “mortgagor’s acknowledgement of satisfactory completion…mortgagee’s inspection report(s), change orders, mortgagee accounting of the escrow funds, and record of disbursements.” It’s important to keep records of these items and more to prove the work was completed according to the agreement and in a timely manner.

FHA changes that will cost Central Ohioans in 30 days

Brent Diebert

September 3rd, 2010 2:40 pm ET

The Federal Housing Administration (FHA) is giving homeowners and homebuyers until October 4 to lock in low monthly insurance premiums currently available. After October 4, the monthly insurance premiums on FHA loans will increase by over 63%. This increase will decrease a homebuyers purchasing power by increasing monthly payments. Homebuyer purchasing a $200,000 home with the minimum FHA down payment of 3.5% before October 4 would pay an insurance premium of $88.46 per month. If the same home buyer waits until after October 4, the insurance premium would jump to $144.75

In this example the home buyer would lose $56.29 per month, or $6417.06 over the 114 months the insurance is typically required. The upfront mortgage insurance premium is going down after October 4 but the real impact to the homebuyer is a net increase in their out of pocket costs as the monthly premium goes up by 63%. Sellers can pay the upfront premium or it can be financed into the loan amount and homebuyers rarely pay the upfront premium out of pocket. In turn the increase in the monthly premiums will be paid directly from the homebuyers as a larger monthly payment.

Although this change may be beneficial for homeowners who plan to keep the mortgage for less than 3 years the record low rates seem quite the risk. Another thing to keep in mind is the fact that FHA loans are assumable adding value to a sales transaction in the event that rates increase dramatically. The change takes effect for FHA case numbers issued before October 4th 2010 so this does not mean the transaction must be done before then just registered so there is still time. The Bottom line is if you are considering purchasing or refinancing an FHA mortgage in the next 30 days you should talk with a mortgage lending professional.

http://www.examiner.com/mortgage-in-columbus/fha-changes-that-will-cost-central-ohioans-30-days

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