This story was published in the San Francisco Sunday Chronicle Real Estate Section
Property type: An owner-occupied single-family residence in Benicia
Appraised value: No appraisal required
Borrowing amount: $539,000
Loan type: FHA 30-year fixed
Rate: Fixed 3.750%
Because their home had dropped in value below the amount of their mortgage, these homeowners thought they were stuck with a much higher interest rate and higher payments. However, under the FHA streamline refinance program, an appraisal is often not required and the current value of a home is not important.
These borrowers were able to lower their rate from 5.50% to 3.75%, saving them $604 per month. They were also pleased to learn that, unlike many refinance transactions, the paperwork was easy. There was no need to document income with tax returns and W-2s and pay stubs. With less paperwork and no appraisal required, the whole process was faster too, closing in 34 days from start to finish.
The FHA streamline program can be a great opportunity if it fits. Homeowners must already have an FHA loan. And even though credit standards are more relaxed, the homeowner must be current on their mortgage payments.
Beyond saving money with a lower interest rate, another large incentive is coming. Beginning this June, President Obama has ordered that the upfront insurance premium required on FHA loans will be reduced to mere fraction of what it used to be. This will save the average FHA borrower thousands in closing costs.