by Patrick O. in Maricopa, AZ, Billiam in Darlington, MD, Alex in Lake Forest.
Ask Kate how does streamline refinancing work: Four homeowners ask about streamline refinances for 1) FHA loans, 2) rental properties with conventional Freddie Mac loans, 3) borrowers with low credit scores, 4) homeowners without verifiable income. Find ideas to push through streamline refis such as cross-collateralization. Keep in mind, rarely does a streamline refi eliminate closing costs.
Question 1: FHA Streamline Loan Requirements
By Patrick O. from Maricopa, AZ
Hello Kate, Do you know of any lenders that are currently following FHA's rules for a FHA streamline loan? I currently have FHA financing. I would like to streamline refi my mortgage. Have had the loan for over 14 months with on-time payments.
But when trying to have them do a no-credit check, no-employment-verification, no-income-verification, no appraisal, no cash-back, they all seem to throw in company overlays. Is there anyone out there that will do real FHA streamline refinancing? Need help. Would like to lower our current 5.5% loan down to at least 3.75%. Thanks, Patrick O.
Ask Kate answers: FHA Streamline Loan Requirements
FHA eliminates many traditional requirements in their streamline guidelines but tells lenders that they are free to add back in the requirements.
Take for example the property appraisal. Although it is not an FHA streamline requirement, lenders are told they can require them. The same holds true for property repairs and credit reports.
FHA also says, "Except for credit qualifying streamline refinances, FHA does not require a credit report. The lender, however, may require this as part of its credit policy." So you can see although FHA does not require a credit report, they make two exceptions. One is for "credit qualifying streamline refinances" and the other at the will of the lender.
You asked for a list of lenders who do not overlay FHA loan requirements but I can't possibly account for companies' individual overlays and guidelines. I wish I could but the second I'd make the list, banks and even FHA would make wholesale changes.
My advice is to interview lenders with specific questions like, "What will you be looking for in my loan file that would require a credit report, employment and income verification, or appraisal?" Once they have answered you, let them know you are making note of their response and expect the information to be accurate.
Now go here for general FHA Streamline Refinance guidelines.
In addition, you
will be interested in these details from President Obama regarding reduced mortgage insurance, effective June 2012: FHA Streamline Refinancing News .
Best wishes shopping for your FHA streamline loan,
Question 2: Streamline Refi on Investment Property with Freddie Mac Loan
By Billiam from Darlington, MD
Kate, I have an interesting situation. My wife and I have an investment property that is currently worth $625k and we owe $260k. It is rented out for $3200. The principal, interest, taxes, and insurance (PITI) of the mortgage payment is $2800 at 5.25%.
We want to refi the loan to a market rate where the payment will be $1925 (PITI). Our credit is perfect, but our income is too low to qualify to refi. Our primary residence is worth $800k and we owe $290k.
Our loan is a Freddie Mac that we obtained back when we occupied the home. We just moved a few years ago to a new house.
Wells Fargo tells me that we could do a streamline refinance if we owner-occupied the home. But they will not do that since it is considered non-owner-occupied. Personally, I cannot believe this. Anything we can do?
Is this the scenario that Harp 3 would address?
Ask Kate answers: Streamline Refi on Investment Property with Freddie Mac Loan
Refinancing rental property has never been a cinch. Streamline refinancing a rental property is even more difficult.
Unfortunately, Wells has the right to create these guidelines. So I suggest shopping for some type of low-documentation loan program through other lenders. But I want to caution that you will most likely be paying a higher mortgage rate and fees due to the loan's parameters.
Another idea is to entice Wells into streamline refinancing your rental property by offering cross-collateralization of your owner-occupied house. There are risks that accompany this decison. If you could not make your mortgage payment for any reason, Wells could foreclose on both properties.
Think it over carefully before entering into such an agreement. Go here for more details: Refinancing With Additional Collateral by Cindy from Honolulu, HI .
You also asked if the HARP 3 refinance program will include rental properties. From reading the different proposals, descriptions seem to lean toward owner-occupied properties. But as of August 2012, these are only proposals with no actual guidelines set in stone. Read the different proposed versions of HARP 3 here:
National Mortgage News: HARP 3 Refinance Updates