Mortgage Monday

New rules are coming out all the time with mortgages and it is hard to keep up with the hype v facts. People are being told to wait and see if their loan will fit into the new and improved program. But will it?

Here are ten facts about the FHA streamline mortgage that you might not know:

1.    Streamline means process not costs. The closing costs are exactly the same.

2.    Your credit score must be a minimum of 660.

3.    You may or may not need a new appraisal. The lender will be the judge of what the value is based on their own geographic research.

4.    You may not have any late payments in the last 12 months and have had the loan for at last 6 months.

5.    It must result in immediate payment reduction and there can be no cash out.

6.    You do not need to state or prove your income, but you will need to verify your employment. If you are self-employed, you will need additional evidence of employment and perhaps income. (With a high balance streamline, both income and employment must be verified.)

7.    The Mortgage Insurance Premium (MIP) will be the same upfront as a regular refinance.

8.    It can take just as long as a regular refi because the lender still goes through most of the same steps.

9.    Closing costs must be paid out of pocket, including points

10. Your interest rate will be higher. For the privilege of cutting corners, your rate can be upward of a ¼ to ½ percent higher than a true FHA refinance.

So when would one do a streamline? When they are certain the value of their home will not meet the loan to value guidelines or if the debt to income ratio will be too high. All of this does not mean the lender of choice will allow the loan to be underwritten as a streamline. The underwriters are trained to produce reasons why the loan should not be done. This is by no means a “no income verification loan” and by no means similar to a HARP program where the loan to value may not have a ceiling. Check with your lender first and see if it is worth the higher rate to do the streamline. Do not forget to comparison shop with and FHA and go to a direct lender if you can.