FHA Mortgage Tips

FHA Underwater Mortgage Refinancing Requirements 2011

FHA Negative Equity Mortgage Refinance Program 2011

Struggling underwater? There might be some hope for you with the FHA underwater mortgage refinancing program for 2011. The common way to refer to negative equity positions on mortgages, is to call them ‘underwater’. It is estimated that about 3-4 million borrowers and homeowners are now ‘underwater’, they have a mortgage loan which they borrowed before 2009, and they market value of the house has plunged. These 3-4 million Americans have mortgages which are worth more than the value of the home they own.

The Making Home Affordable Program (MHA) goals are to solve these kind of problems to help as many Americans be a proud homeowner.

This situation is unfair to the homeowners as they are paying high interests (from before 2009) on large amounts (like the home value back then) while actually the current rates are lower and the value of the homes is substantially lower. The lenders are at risk too, because if the borrowers failed to pay the mortgage payments, they will have to sell the homes as foreclosure, and these homes are worth less than the amount owed.

Underwater Refinancing Is An Option for Lenders

The U.S. Department of Housing and Urban Development (HUD) released a program with the FHA to help million of homeowners which are currently underwater, to refinance their mortgage. The program is set to run from 2010 till 2012, so now at the mid of 2011 it might be a good chance to solve any underwater mortgage refinancing, with the FHA offer.

The special thing about this FHA underwater refinancing, is that though it is an FHA refinancing program, it is a voluntary option for the lenders. There is no way the federal government can make lenders join or decide which mortgages to refinance, but after placing some basic guidelines for underwater refinancing, more and more lenders join.

The FHA has sent a mortgagee letter to all mortgage lenders with the specification on the underwater refinancing process, guidelines and requirements. You can read below the main key underwater refinancing guidelines and FHA refinancing requirements for this option.

FHA Underwater Refinancing Requirements 2011

The FHA and the HUD have some basic underwater refinancing requirements, these requirements are for the borrowers and the mortgagee lenders. All these FHA underwater refinancing requirements make sense and are planned to help as many people who are ‘drowning’ underwater.

 There are requirements from the borrower to meet some conditions to be able to qualify, and there are specific conditions for the lenders what is expected from them withing this program guidelines.

Who Is Eligible For Underwater Refinancing

• Negative Equity – Well the borrower must be currently in an underwater mortgage situation to be able to qualify.
• No Late Payments – The homeowner must be current on mortgage payments. Because this is a voluntary program for the lenders.. no one would refinance for an unifying borrower.
• Current Home Residence – The borrower must be living in the home being refinanced for qualifying. The program is meant to help homeowners and not real estate investors. 
• Non FHA Loan – The underwater program is not for FHA home loans. It must be a private regular mortgage.
• Meet FHA Loan Requirements – The borrower must meet the minimum FHA requirements concerning mortgage approval. This means having a FICO score 500 or higher. To improve your FICO score in 37 days, see here.
• Lien Holder Write Off 10% - The existing first lien holder must write off at least 10 percent of the unpaid principal balance.
• LTV of 97.75% – The Loan to Value ratio for the FHA insured loan must not exceed the 97.75 percent.
• All Mortgages Will Not Exceed LTV of 115% – If the lender has more than one mortgage on the property, than by the FHA underwater refinancing requires, they must all be blended to the maximum of 115% of LTV loan to value ratio.
• Front End/Back End Debt To Income Ratio – The FHA and the lenders are worried whether the borrower will be able to stand the new mortgage offer. For this reason they require a ‘front end debt to income‘ ratio of 31% and a ‘back end debt to income’  ratio of 50%.

FHA Mortgage Underwriting Requirements

As you may know, the FHA is not granting funds for mortgages, the government administration is insuring the mortgages for the lenders, and backing the borrowers obligation to pay the mortgage in full. For this reason the FHA has it’s own underwriting processchecking and pre qualifying the borrowers.

With underwater refinancing requirements, the underwriting process is the same, and the lenders need to use the FHA TOTAL process for the evaluation of the risk classifications. If the TOTAL process of risk classifications has “proved” the borrower, then the lender does not need to over-check the lender again. So once as a borrower you have a FHA refinancing ‘clearance’ you are OK as far as the lenders are concerned.

It is the lenders responsibility to check the data they sent, and be sure that all the information has been evaluated. They need to make sure that Direct Endorsement Underwriter has seen the appraisal.

Underwater Refinancing HARP and HAMP

The federal government (HUD and FHA) has issued programs to help underwater homeowners. The two refinancing options seem the same, but they have some fine differences between them.

HARP (Home Affordable Refinance Program) was made to help underwater refinancing, the main requirements are LTV of 105%-125% (loan to value) and the borrower must be never late on payments for the last 12 month. The mortgage refinanced must be owned by Fannie Mae or Freddie Mac.

HAMP (Home Affordable Modification Program) was made for those facing foreclosure. The basic HUD requirements are that the mortgage is owned by Fannie Mae or Freddie Mac or the U.S Treasury. And there are signs for immediate danger for the survival of the mortgage as it is. Within the HAMP there is an incentive for the lenders to change some mortgage terms.

FHA Underwater Refinancing Conclusion

If you are a homeowner and you are ‘underwater’ the best thing to do, is to find which of the underwater refinancing programs is best for you. Since most of those refinancing programs are voluntary for the lenders, you will have to show that you are a customer they are willing to accept.

Though the FHA minimum FICO score is 500 there is likely not to be any bank who will want a new costumer with such a poor credit score. The minimum FICO score for the FHA mortgages is 580, but lenders today approve applications with a score over 620 and 640, this is called overlapping. So if your score is lower than that you must begin fixing your credit score, it is a long journey, but it is worth to begin it as soon as possible.

For the best option to be approved for the FHA underwater refinancing requirements,  you must raise your credit score, so you will have better chances getting approved by the lenders. See the 37 days credit repair program.

FHA Streamline Refinance Guidelines 2011

FHA Streamline Refinancing Basics

The ever low mortgage rates have made 2011 the right for refinancing. Millions of homeowners have taken in the past years FHA home loans, and now they want to take advantage of the best mortgage interest rates, by refinancing the FHA mortgage. The FHA  (Federal Housing Administration) has published the new guidelines for 2011 streamline refinancing.

The name streamline was chosen to emphasis that the refinancing process can be prompt with less paperwork, and in some cases with no appraisal needed. What guided the HUD  (U.S. Department of Housing and Urban Development) is that homeowners would lower their monthly payments. The streamline refinancing is available to FHA mortgage borrowers only.

Any other situation where the monthly payments are not reduced can not go through the streamline process. There are other FHA cash out refinancing or non cash out programs  which mortgage holders can refinance current mortgage and change the terms to reach their needs.

Saving Money With Streamline Refinancing

Having low interest rates is the first step before you can save money by refinancing. There are numerous items that ought to be checked to find out if you will be saving money by the FHA streamline refinancing program. Like with all other FHA mortgages, the FHA does not lend the money, the lenders (banks and financial institutions) are the ones who determine the mortgage interest rates, and the conditions of the mortgage.

FHA Streamline Refinancing Qualifications

In order to proceed with the FHA streamline refinancing, you must meet these basic requirements as stated in the HUD official publications. As you will see customers who meet these streamline qualifications are the best borrowers, and they only are allowed the ‘fast lane’ refinancing. The minimum criteria are as followed:

• 6 Monthly Payments – The refinance mortgage must have at least six monthly payments, paid before the loan application is filled. Newer mortgages can be refinanced, but not in the streamline process.
• 100% On Time Monthly Payments – For mortgages with less than one year being refinanced, the borrower must be able to show that all 12 previous payments where completed with no delays and no late payments.
• Only One 30 Day Delay – Is accepted for mortgages which have been paid more than 12 month. On top of this, the borrower must not have a 30 day delay, within the last 3 month from the loan application submitted.

Other FHA Streamline 2011 Requirements

5% Reduction in Total Mortgage Payment - The FHA will check to see that the new refinanced mortgage payments are at least 5% less than current payments. The ‘Total Mortgage Payment’ mean that this is the actual sum being paid every month, and is including: principal, interest, taxes and insurances, homeowners’ association fees, ground rents, special assessments and more.

Streamline Refinance Credit Scores Required – The FHA is requesting the lenders to add the credit score they have to the application. If there is more than one FICO score available, they are requested to send them all. Having a low score can damage your chances for refinancing, the best advice is to raise your FICO score by using simple on-line programs (like the 37 Days Credit Repair  plan) which do not cost much.

Streamline Refinancing Appraisal

The FHA does not demand repairs to be done, except lead-based paint recovery (for safety reasons), on the other hand the lenders can request an appraisal report to be delivered by a certified FHA appraisal on the property. The lenders which are going to be the ‘real owners’ of the property (until mortgage is fully paid) may request the repairs to be completed! In this case the repair will be paid out of the borrowers own money.

The actual mortgage sum of money the FHA streamline refinancing will refinance may change according to the Streamline Refinance plan. When an appraisal streamline is done, the sum will be the Maximum loan-to-value percentages multiplied by the appraised value. When no appraisal is done the refinance mortgage will be the outstanding principal balance plus interest charged by the servicing lender.

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• 37 Days Fix Credit Plan
• Magic Credit Repair Software

FHA Cash-Out Refinances Becomes Tough

FHA 2011 Cash Out Refinancing

There are many reasons why to refinance a mortgage, either lower the monthly rates, or shorten the amount of years due. On other reason is that in some cases there can be cash out option, where after refinancing the home owner gets a large sum of money in cash. These Option was a lucrative option for the FHA cash out refinancing plans at 2009.

These days the HUD  (U.S. Department of Housing and Urban Development) have published new guidelines for the cash out refinancing option. These are concerning the FHA Refinancing plans only, the non government insured mortgages can be still cashed out privately by the lenders specific terms.

How To Get Money With Cash Out Refinancing

The option to get cash out of a refinancing process is well known, it was used by real estate investors when the mortgage rates plunged at 2009. It was then that the FHA cash out refinancing got the leash. How to get cash out refinancing? Simple, think that a property value is $150,000 and the mortgage left to pay on the property is $100,000. With the low interest rates, the homeowner can refinance $130,000 and get $30,000 cash from the deal for which ever use he needs.

Why people cash-out? There are many reasons, the financial reason to cash-out is that with ‘cheap’ money they can pay off credit card loans, auto loans and other expensive debts they have. When monthly credit interest rates reach 20%, paying them off with a 5%-7% rates makes a lot of financial sense.

Another financial reason to cash out can be when people believe that investing the money could make them a larger profit than the current mortgage rates. Other use the cash as down payments needed when they buy another property. Another financial reason to cash-out is to pay for expensive home improvements, when paid by credit or regular loan would cost more.

FHA Cash Out New Requirements

At 2009, the HUD decided that these FHA cash out refinancing should be slowed down. The decision was made in order to avoid these Cash Out Refinances to be a quick way to get money over the tax payers insured FHA loans. New regulations were issued on these refinancing programs.

Today these refinancing programs are available with some tougher regulations. The FHA still has the streamline refinancing programs which are more easy to apply and succeed to meet their requirements.

Cash Out Refinancing Interest Rates

The mortgage rates of a cash out refinancing is usually higher than a streamline refinancing. Lenders know that you are borrowing a larger sum than is needed to cover for the current mortgage,  so they are ‘selling’ their money for higher rates. These rates apply for the new mortgage and not only for the remaining delta of the cash you take out.

On top of this there will be extra costs to the mortgage process with a cash out refinancing. The appraisal and closing costs are out of the pocket and can not be added to the new FHA refinanced mortgage. 

Guidelines For Cash Out FHA Refinancing

The basic guidelines for the cash-out refinancing are:

Have 15 Percent Equity- These refi plans are restricted only to people who have gained at least 15% of the home equity. This is done so mortgages will not be cashed out too quickly, and not too close to 100% of the home equity. This cash out FHA refinancing rule is the refinance can not exceed the 85% of the appraisal evaluation.

Owner Occupied – The rule says that the property must be used for living by the owner. This means that rented property can not be included for the FHA cash out program.

One Year Mortgage – The 12 month rule was made to avoid people using the loophole and getting a no money down FHA loan and immediately cashing out by refinancing. In case that the property was inherited.

 These are the general FHA cash out refinance rules, though they are more harsh than before the April 2009 HUD letter, for some they are still at reach, and can allow cash out for other purposes as mentioned above. It is worth to fully check the FHA refinancing requirementsto see that you can financially benefit from the refinancing process.

FHA Refinance Requirements 2011

Requirements For 2011 FHA Refinancing

The FHA refinancing requirements for the current 2011 programs are helping FHA home loan borrowers to take advantage of the ever low mortgage interest rates. Having low interest rates is a great time for taking mortgages, and a refinance process, is just that, taking a new mortgage with better rates and closing off the current mortgage. See this short review on the 2011 FHA refinancing requirements.

What FHA Refinance  Programs Are Available

There are several FHA 2011 refinancing programs to pick from. Not all of the refinancing plans are suitable for all the borrowers, it depends if the borrowers are in line with the FHA 2011 refinancing requirements.

The two main programs offered are called:

FHA Cash-Out Refinance and FHA Streamline Refinance.

FHA Cash-Out Refinance 2011 Requirements

Cash out refinancing was a very lucrative offer back at 2009, it was so lucrative that the HUD administration had to tighten the FHA Cash-Out Refinancing requirements for these plans, as people took mortgages they could not handle just to refinance them a month later and cash out due to the declining rates. The current FHA refinancing requirements 2011 for the cash out programs are:

• 85% Value – The FHA insured refinance mortgage offer may not exceed 85% of the appraiser’s estimate of value. This is done so 100% mortgages would not be cashed out easily. This means 15% equity must be built over time.
• One Year Ownership – The FHA refinance will be provided if the property was owned for at least one year before the refinancing request. This too was done to prevent month to month borrowing and refinancing with cash out.
• 1-4 Unit Property – Not any property could be refinanced with the cash out option. This was meant to help people, so the requirements for 2011 FHA refinancing are specific for domestic 1-4 unit home property.
• Owner-occupied – This requirement is meant that only people who use the property for personal use will enjoy the cash out. Other real estate investment intentions and rented property can not get FHA cash out refinancing.

FHA Streamline Refinance 2011 Requirements

The HUD streamline FHA refinancing requirements are simple to follow:

• FHA Mortgage - The HUD (Housing and Urban Development) requires that the streamline refinance will be issued only to people who took the FHA insured home loans. This is meant to help those who needed the FHA and borrowed their mortgage with the FHA loan requirements.
• First FHA Mortgage Only – The streamline refinancing is permitted only to those paying current mortgage.
• Lowering Payments – The streamline refinancing will be proceeded only if the monthly refinancing payments is lower than the current mortgage payments. This is done because there are plenty of reasons to refinance and the HUD wants to make sure – the monthly payments are reduced to allow more borrowers more financial possibilities when times are tough.
• No Cash Out – One other requirement for the FHA streamline refinancing is that no cash will be taken out during the refinancing process. For this option there is the Cash Out Refinancing program, mentioned above.
• Minimum 6 Payments – There need to be at least 6 monthly payments on a FHA loan before the FHA streamline refinancing can begin to take effect.

FHA Refi Plans Conclusion

For those who have took a FHA home mortgage, and have been building some equity over time, these two refinance programs are a lifesavers, allowing the homeowners to lower their monthly payments and get some relief from the high mortgage payments.

The FHA refinance requirements for 2011 are fair and thoughtful to prevent those who want to take financial advantage of the government backed home loans.