Did you know that there are mortgage programs for Mass. homeowners that will allow you to refinance without an appraisal? These refinance programs are available if you have a FHA, Fannie Mae and Freddie Mac loan. These “under-water” refinances are specifically designed to help MA homeowners take advantage of the low mortgage rate environment without being required to have equity in their homes.
As a result of the housing market crash that culminated with record market selloffs in the beginning of 2009, President Obama and Congress passed the Making Homes Affordable Act. This program has paved the way for MA home owners who have a Fannie Mae or Freddie Mac mortgage to refinance their home without the requirement of an appraisal. These programs are easy to close, and have more relaxed underwriting standards than traditional refinance programs.
The Federal Housing Finance Agency (FHFA) and the Department of the Treasury introduced the HARP program in early 2009 as part of the Obama Administration’s Making Home Affordable program. HARP & now HARP 2.0 as it is referred to, provides borrowers a mortgage weapon in this long housing market war.
Which borrowers may be eligible for an enhanced HARP?
In general, borrowers must meet the following criteria:
- The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The mortgage cannot have been previously refinanced under HARP unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
- The current loan-to-value (LTV) ratio must be greater than 80%.
- The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.
- Minimum representative credit score of 620 if payment is increasing more than 20%
- Maximum DTI ratio of 45% if payment is increasing more than 20%
THERE WILL NO LONGER BE A MAXIMUM LOAN TO VALUE RESTRICTION
- There is no longer a maximum L.T.V. limit for borrower eligibility. If the borrower refinances under HARP and their new loan is a fixed rate mortgage, there is no maximum L.T.V.
- Borrowers can utilize this program if they have a second mortgage as long as the 2nd mortgage holders agrees. You can just keep the 2nd mortgage on title and refinance the first.
What is this program useful for?
- Reduction in the borrower’s monthly principal and interest payment;
- Reduction in the interest rate;
- Reduction in the amortization term; or
- Movement to a more stable product such as an adjustable to a fixed
What if I currently have P.M.I. (private mortgage insurance)?
The P.M.I. companies have pledged their assistance to offer options when needing to re-write the P.M.I. The P.M.I. will remain on the loan if it is currently there, unless the loan to value is under 80%.
Do I need an appraisal?
In most cases no. The lender will run the loan through the automated underwriting system and it will determine if one is required. I find that many single family homes do not require an appraisal to be completed. Appraisals may be required for condos, multi families, and non-owner occupied properties.
FHA Streamline History:
The FHA Streamline loan has been around since the early 1980’s but has only recently gained popularity with the combination of decreased home values and low mortgage rates.
How Do I Qualify?
- Must currently have a FHA loan
- According to FHA you don’t have to have a minimum credit score to qualify, but the majority of lenders have their own “underwriting overlays”. Most banks require a 640 middle score and a couple will go down to a 620.
- Must show proof of employment, although not proof of income
- Must not have made any late mortgage payments in the past 12 months if you want to refinance without an appraisal, 1 mortgage late with an appraisal
Can I Really Streamline my FHA Loan Without an Appraisal?
YES YOU CAN! Every FHA loan in the US has a unique FHA case # that has been assigned. Think of your house as having it’s own FHA medical record number. When we look at doing the FHA Streamline, I can access that FHA case# much like a doctor uses your medical record number to pull up your history. The FHA case # will contain the underwriting information from your last FHA transaction. The most important part of that information is the appraisal value from that previous transaction. FHA will permit us to use that value for your new FHA Streamline.
What is the Cost of The FHA Streamline?
A FHA Streamline refinance without appraisals do not permit lender fees, points, attorney fees, or escrows to be added to your current loan balance. There are only two amounts that get added. The first is your new upfront FHA insurance. The second amount is up to 2 months of mortgage interest. Most lenders do this to allow you to have a month off on your mortgage. The loan still has all the basic fees laid out above but we use a portion of the bank profits to cover the costs of the loan.
How Often Can I Streamline my FHA Mortgage?
You can streamline every 6 months, although with rates being so low right now this might end up being the best opportunity in history.
How Long is FHA Streamline the Process?
Typically 3-6 weeks depending on underwriting timelines.