The government just made refinancing your FHA mortgage more affordable, and more importantly possible, at least for a few hundred thousand homeowners that couldn’t take advantage of today’s rates before (June 11th).
The Federal Housing Administration has reduced MI (mortgage insurance) fees significantly for SOME homeowners who qualify for the FHA’s streamline refinance program. The lower fees are currently in effect and are available to those refinancing FHA loans originated before June 1st of 2009.
FHA’s Streamline Refinance program requires limited documentation and, in most cases, no appraisal. This allows any FHA borrower to refinance regardless of if they are underwater on their loan or if they have equity.
Since the “implosion” of 2008 and 2009 almost 800,000 homeowners have been able to refinance their mortgage into a lower rate/payment through FHA’s streamline refinance program. However of late the cost of an FHA loan has increased, by quite a bit depending on when you originally got your loan. This made refinancing tough, if not impossible, once you calculated in the higher MI rates. Even though the interest rate and the mortgage payment itself went down the mortgage insurance ended up eating the difference in savings.
With the new lower FHA Streamline refinance MI rates those that qualify no longer have to worry about current FHA MI rates for everyone else, those that qualify for these new rates (FHA mortgage originated before June 1st 2009) can take advantage of today’s historically low interest rates, saving hundreds on their mortgage payment itself, they can also take advantage of drastically reduced MI rates. Lowering the payment even further (and making it possible for some homeowners that it was impossible for before).
Under the new guidelines a homeowner refinancing a $250,000 mortgage will pay $25, compared to $4,375, for their upfront MI (UFMIP). A pretty big difference! This number is usually financed into the loan so it doesn’t require anything out of pocket anyways, but it is REAL MONEY in the long run.
The same homeowner will also only pay $114 a month, compared to $260 in monthly MI (FHA’s annual MIP). Which is where the real savings is…
The reason is because under the new plan FHA MI premiums have been reduced to 0.01% of the total loan for the UFMIP and the annual premium down to 0.55%. Other FHA borrowers, those not eligible, will still be paying 1.75% for their UFMIP and 1.25% for the monthly MI. Refinancing at the higher rates might still be a great decision for some, but those that qualify for the lower MI premiums have a no-brainer on their hands!
To qualify for the reduced fees on an FHA Streamline refinance you must:
- Have a mortgage already insured by HUD (FHA).
- Be current on the mortgage and have no more than one late payment in the last 12 months
- Have a mortgage that was endorsed by HUD before June of 2009.
Something to think about is you may have had your loan since May 30th, 2009, but this DOES NOT mean your loan was endorsed by HUD before June 1st of 2008. Lenders generally try to get their HUD endorsement in no more than 10 days but in some cases it can take a month, maybe even longer… The best way to make sure your current loan was endorsed before the cutoff would be to call/e-mail me and let me look it up for you.