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FHA Streamline

My mortgage broker told me he can refi me from 5% down to 3.75% with a FHA streamline.  Told me there would be no costs, I would just need to sign documents.  I have only been in the house for 2 years.  He mentioned my payments will go down about 250 a month,  The way he explained it my PMI would go up but my mortgage payment would go down.  Wouldnt this mean it would take me longer to get below 80% to wipe out PMI.  Does it make sense to do a refi so early in a mortgage?  Am I missing something?
  • January 30 2012 - Longmont
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Answers (22)

Do you have a quote to see the new payment? What is your loan balance? $250 net savings sounds like a stretch unless you have a LARGE balance.
  • January 30 2012
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If your loan was originated 2 years ago and you are going from 5% to 3.75%, I can't figure out the math that would allow a $250 / month reduction in payment. This is not to say it's not possible; admittedly I'm barely into my first liter of caffeine for the day so I could be wrong. 

You definitely need to ask to see it in writing though. I'm with Clay and curious what your balance is as well as how much you put down originally.
  • January 30 2012
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Hope your info is correct. What a great deal!
  • January 30 2012
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Getting the quote today, maybe he meant the most is 250.  Loan was 461 and now down to about 450. 
  • January 30 2012
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I think your net savings will be aprx $130-$140, if your current monthly MI payment is $192/mo.   
  • January 30 2012
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thanks does it even pay to do this?  I am not in great need of the 140 a month, if in the long run its going to take me longer to get my pmi off my mortgage...
  • January 30 2012
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That depends, if you plan on owning this home long term, then yes. While $140 is not a big savings compared to your payment, if that savings is applied to the new loan as additional principal you will get rid of the monthly MI about 1 year earlier ( in aprx 7.5 years ), then you are saving aprx $561/mo for the next year. After that the MI would have dropped from your existing loan so at that point you are saving aprx $370/month.
   
  • January 30 2012
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FHA limit in Boulder County is $460,000 and as you said your loan amount is about $451k.

The P&I on $451k at 3.75% is $2,088 and the MI is $432 for a total of $2,520. 

Your present loan is about $2,475 P&I and about $211 MI for a total of $2,686

I can see where the payment is dropping about $166 or so, I don't see how "up to $250" even entered the conversation, not even close..

If you proceed; then do the the streamline as an FHA streamline without appraisal, that way the original value remains in the FHA system for calculation of the removal of the monthly MI. Since it was offered to you as  a no cost refi this should be easy to achieve. 
  • January 30 2012
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thanks for the clarification.  The numbers make sense.  I got killed on taxes.  I bought the house new construction.  The city charged taxes the first year on the house previously there.  I was paying like 1800 a year.  When they reasseted the taxes went to 5800 a year. so all of a sudden my mortgage payment went up close to 350 a month.
  • January 30 2012
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Well then a streamline will help offset some of the tax reassessment / increase in payment. You are still better off with the lower rate in the long run using the no appraisal program for the reason the Prez stated.

Unity, are you in CO or NY? 
  • January 30 2012
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I am in NY.  Love how home values go down but taxes go up.
  • January 31 2012
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last question.  Do I gain anything by going with my current mortgage holder and doing a fha streamline with them? 
  • February 02 2012
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Only if they have better terms than everyone else :).  A few lenders will allow you to roll the existing escrow which would be an advantage if your escrow is significant. Other than that I cant think of any other advantage. What is your current escrow balance?
  • February 02 2012
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I jsut checked and its only 1,000.  Im getting the paperwork today and you were right savings was about 169 a month. I called my current lender, and they told me what is happening is that they are applying my closing cost approx 9k into the balance of my mortgage making it cost free.  I havent seen the paper work but it seems most likely. He also said there is no way I am getting 3.75 doing it this way. 

  • February 02 2012
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Sorry, I forgot about the tax reassessment, in addition to the closing costs there will also be a much larger escrow required. Now, they can only add closing costs and prepaids into the new loan amount if they are doing a streamline WITH appraisal. Will your home appraise for 2.25% more than the current balance? I would love to see their quote once they give it to you.
  • February 02 2012
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Using the FHA streamline with no new appraisal my house will be 470. I guess I need to see all the paper work.
  • February 02 2012
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   they told me what is happening is that they are applying my closing cost approx 9k into the balance of my mortgage making it cost free.

 If no appraisal then they are not applying the 9K in closing costs " into the loan balance", they are raising the interest rate and paying the closing costs with a lender credit which is the only way to do it without you writing a big check. You have aprx 2 months of reserves in escrow after the tax reassessment so the new escrow may be another factor that must also be covered in the lender credit if not included in the $9K figure.  
  • February 02 2012
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Yes I got the form finally.  They are giving me a 3.75% rate.  What is a lenders credit?  Only thing I would have to bring to closing is mortgage payment.
  • February 02 2012
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It is the premium for a certain rate ( the opposite of buying the rate down ). Looks like the premium for your rate is about 1.9% which is used to pay the closing costs of $9K. If you needed $14K, then you would get a rate around 4% paying a premium of $14K, etc   
  • February 02 2012
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I think it makes more sense for me to pay down the loan to get to 5%, then go for a conventional mortgage.  The fha streamline is a saving of 160 a month, but im losing the tax deductiable interest.

  • February 02 2012
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unity, if you paid the balance down to get 5% equity would the balance be $417K or less?  
  • February 02 2012
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My house was appriased at 470 so 5% would be 446,500. 

  • February 03 2012
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