If you want to streamline your FHA mortgage, you need the right mortgage lender and solid knowledge of the requirements. To streamline your refinance, you must already have an FHA insured mortgage, and you must be up to date on your payments. The streamline also has to lower your monthly principle, though under certain circumstances, it can be used to convert an adjustable rate mortgage (ARM) to a fixed-rate mortgage. No appraisals are required to streamline your FHA mortgage as the original purchase price is used, and you can streamline even if your home is underwater.
As with any FHA-insured mortgage, two types of mortgage insurance payments are required. You will have to make an upfront mortgage insurance payment upon closing, in additional to an annual payment split into 12 installments paid along with your mortgage each month. Your mortgage insurance premium (MIP) amount depends greatly upon whether or not your original loan was granted before June 1, 2009 due to regulations, with mortgage insurance being less costly for older loans.
If your existing FHA mortgage was endorsed on or after June 1, 2009, your upfront payment for the streamline is equal to 1.75 percent of the loan amount, or 175 basis points. Fortunately, you may not have to pay this full amount as the FHA offers a refund on a previously paid up front MIP, provided your original mortgage is less than three years old. The annual MIP as of April 1, 2013 is as follows:
- 15-year loan terms with loan-to-value over 90% : 0.70%
- 15-year loan terms with loan-to-value under 90% : 0.45%
- 30-year loan terms with loan-to-value over 95% : 1.35%
- 30-year loan terms with loan-to-value under 95% : 1.30%
Streamlined FHA mortgage amounts of $625,500 or more (called Jumbo Loans) are subject to an additional 0.20 percentage point annual mortgage insurance charge if the loan term is greater than 15 years. Other Jumbo FHA loans of 15 year terms or less are subject to an additional 0.25 percentage point increase.
If your existing FHA mortgage was endorsed before June 1, 2009, then your upfront payment for the streamline is equal to .01 percent of the loan amount, or 1 basis point. The annual MIP is just .55%, or 55 basis points, across the board.
Please note that on June 3, 2013, the FHA is changing the MIP cancellation policy. Currently, the FHA will cancel your MIP if you’ve paid mortgage insurance for at least 5 years, and your loan size is less than 78% of the lower of your home’s original purchase price or appraised value. Now, the FHA will only remove your annual MIP after 11 years, so long as the starting loan to value ratio was 90% or less. Otherwise, you’ll have to keep paying your MIP for as long as your loan is active.
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