FHA Streamline Refi

[nicemann]

Ok, trying to figure out if it is worth it for me to start calling banks asking them to Refi my FHA loan.  I currently owe $149,000 on my mortgage.  I've had it for over 2 years.  Currently at 6% interest rate.  Not sure with all the closing costs on the loans if it is worth it for me.   Never been late, always paid early.  FICOs are much better then what I got the loan at.  Can't do a traditional mortgage because I am upside down in the house by about 20k (dang economy).  Also no second loan or anything on it.  

I'm sure I will be in this house for another year or two but not sure how much longer after.

Any advice?

[ShanetheMortgageMan]

The process of doing an FHA streamline changed last year.  It used to be that you could include closing costs no matter what, now in order to include closing costs you need to get an appraisal and have sufficient equity.  Since you are underwater on your home, you would have to pay closing costs out of pocket (and you wouldn't want to get an appraisal).... this is called the "Streamline with no appraisal" option.  The new mortgage balance can only be the amount of your payoff.  Using rough figures, you could shave about $125/mo off your payment if you were to refinance into current rates.  Closing costs would be approximately $2,000-$2,500, so the break even point would be anywhere from 16-20 months.  You also will have to fund your new escrow account, and pay pre-paid interest on the new mortgage... so the actual funds to close would be quite a bit more than $2,000-$2,500.  But you do skip a months payment (closing on July 25th will make your new 1st payment due September 1st) and you'd get a refund of your current escrow account balance from your existing lender, so those extra items are a wash.

Also keep in mind that when you pay off an FHA mortgage, it always charges interest through the end of the month (paying off an FHA loan on June 23rd will still charge interest through June 30th), so it's always advised to time the funding of the new loan with only a couple days left.  On a refinance there is a 3-day right to rescind, starting the day after you sign your loan and excluding Sunday's & Federal holidays, so you really need to sign by July 26th 2010 if you want the loan to fund on July 30th 2010.

What would you do at the 2 year mark if you were still underwater?  Short sale, bring in the difference to sell, or continue having the mortgage on the home?  If short selling or bringing in the difference isn't something you think you'd do, you may be in the loan longer than the 1-2 years you anticipate.

The new FHA streamline requirements can be found at Mortgagee Letter 09-32 (MS Word document)

[nicemann]

Shane...I greatly appreciate your help.  You were nice enough to help me to get this loan two years ago with your advice.

Yeah I thought about what if in two years, the market doesn't change.  I don't think it will change enough in two years, especially here in Phoenix.  I think I will be here much longer then I think.  So the 16 month break even point may be an ok idea.  I have the money to pay up front if needed.  I am already paid thru on my current mortgage till August 1st, so I don't want to do anything just yet.  Would hate to loose that payment.

Any suggestions of places to look online for a great rate and minimal closing costs?  Don't even want to think about points.

[ShanetheMortgageMan]

Welcome, I helped you with your loan?  Either way, you don't lose out on the August payment you made, it's just deducted from the payoff on the existing mortgage.

[nicemann]

---

@ShanetheMortgageMan wrote:

Welcome, I helped you with your loan?  Either way, you don't lose out on the August payment you made, it's just deducted from the payoff on the existing mortgage.

---

Sorry the help you provided was for support and answer questions.  Give me the encouragement to even try when my credit was so low.