Profile picture for BErdmann

FHA Streamline refi:Can lender credit from rate increast be used for closing costs and pre pds?

I am looking into FHA streamline refi. Refi amt is 208k. Lender is offering 3.75% with credit of 2293. Howver, the total closing costs (excluding pre-paids) is LESS than the total credit and I am being told that my rate will not be reduced, but my credit WILL be reduced to a dollar igure which only covers the closing costs. Once all closin costs are subtracted from the credit , there is still $329 of the credit left. Why can't i apply that to my pre-paids (escrow and daily interest) if my rate will not be adjusted down slightly when the credit is adjusted down? Seems that the credit must be calculated as a percentage of the loan amount, and that % is determined by how much the rate is increased (from 3.5 to 3.75 in my case) Is this fair?
  • August 20 2012 - US
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Answers (4)

Profile picture for Academy Mortgage AZ
Bottom line on a streamline you should not have to come out of pocket for any lender fees or title fees.   Depending on the amount of your property taxes and insurance you may have to pay some of your pre-paid taxes and insurance.   You will get a refund from your current escrow account.   When you do a streamline make sure you are not coming in to close with any lender or title fees. 

Chad
  • August 20 2012
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It is done everyday and for a little over 1% of a lender credit you cna do better than 3.75%
  • August 20 2012
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FHA will allow the lender credit to be applied to prepaids. However, some lenders will have an overlay where they don't allow it.   (Our company does this as well)

Is $379 worth it for you to be upset?   You are still getting an attractive rate without any closing costs. If you don't like what they have to offer, you can always go somewhere else.
  • August 20 2012
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The difference can be used towards prepaids, it's done everyday. 
  • August 20 2012
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