New FHA Streamline Rules Help Make Refinancing Easier

Effective June 11th 2012, new rules regarding FHA Streamlines will help some borrower refinance into lower rates.

While everyone is well aware of mortgage rates being at all time lows, access to those low mortgage rates remains tight, with credit score minimums,  increasing mortgage insurance premiums and falling home property values.

In the Midwest, St. Louis, Kansas City, and Indianapolis, home values have not been hit as hard, but still, many customers who make their mortgage payments on time have missed out on the benefits of these low rates because of inability to qualify.

Specifically, for those who have a HUD backed mortgage, increasing mortgage insurance premiums have become the largest obstacle to helping borrowers take advantage of lower rates, having gone through numerous premium increases as rates have fallen in recent years.

However, effective June 11th, 2012 some who have paid their FHA mortgage on time will have the opportunity to cheaply save money by lowering their rate, and mortgage insurance premiums(both upfront and monthly)

In order for a borrower to qualify, the following will be needed:

  1. Must have an existing FHA mortgage endorsed prior to May 31st, ,2009.(Endorsed, not closed)
  2.  Mortgage must be paid on time.
  3. May be done without an appraisal.

Upfront Mortgage Insurance Premiums (UFMIP) will be reduced from 1.75% currently being charges to .01%(yes. 01%)

Monthly premiums will be reduced from 1.25% on 30 year mortgages over 95% LTV to .55% on most loans.

So What does that translate to?

About $100 on a $175,000 30 year fixed rate refinance compared to today’s FHA mortgage insurance tables.

Home Buying and Mortgage Loan Quick Facts

So kids, you want to buy a home in St Louis?  Homestead Financial is a Mortgage Company in St Louis and Kansas City with answers to the most common questions and the information you will need to qualify for a mortgage loan.

  • How do I qualify for a mortgage?
  • What does my credit score need to be?
  • How do I improve my credit score?
  • How much down payment do I need?

Let’s start with the 3 C’s of qualifying for a mortgage: Credit, Capacity, and Collateral.

Credit, Capacity and  Collateral

CREDIT: You used to be able to get a decent interest rate and big mortgage with a credit score at or around 580. Now it takes at least a score of 640, if you are below that, you’ll have to work on improving your credit.

580 with X thru   640 underlined or circled

There are many ways to improve your credit score, but paying bills on time and keeping balances low are the best places to start.

Ways to improve your credit score:

Rule no. 1   Pay bills ON TIME

Rule no. 2    Keep credit card (and other monthly debt balances) LOW

CAPACITY: You need to be able repay your mortgage loan and support that ability to repay with documentation. Borrowers must prove sufficient income as well as demonstrate an acceptable debt-to-income-ratio. In other words, your documentable income must be good, but you also cannot be carrying a lot of debt. It’s a good idea to reduce your credit card debt as much as possible before beginning the home buying process.

Most recent pay stubs, W-2 (last 2 years), tax return (for self employed last 2 years)

A debt-to-income ratio below 40% is recommended   for example: $2000 monthly obligations/$5,000 gross mo income = DTI of 40%

COLLATERAL:    Today most banks want borrowers to put down 20% of the purchase price of the home. However, there are many programs offered by the FHA as well as Mortgage Insurance Companies that insure mortgage lenders against loss while providing options to help consumers buy or finance homes with less than 10% down.

Recommended down payment is 20% of the home purchase price

OR

Reduce required down payment amount with:

FHA programs (such as 1st time home buyer programs)

PMI (private mortgage insurance)

Thanks for viewing our 3C’s quick facts video, I hope you found it helpful.  If you have any questions please feel free to call us, our loan officers are friendly and ready to help!

Our loan officers are happy to answer any questions!  So give us a call at 800-Homestead-8!