? FHA Streamline Loans ?

Discussion in 'Archived Threads 2001-2004' started by Brian Mansure, Dec 21, 2002.

  1. Brian Mansure

    Brian Mansure Second Unit

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    It seams that lately I've been getting more calls at home and been getting mail from mortgage companies claiming they can give me a re-financing loan on my home at a lower interest rate with no credit approvals and little or no closing costs.

    So right off the bat I'm skeptical because as the saying goes... if it seems too good to be true (you know the rest).
    Anyhow, just today my wife gets a call from our existing home mortgage company (Countrywide) an they offer us the same type FHA "Streamline" refinancing loan at a fixed 6.25% which definitely beats our current 8.0% rate we originally locked into 3 years ago.
    This Streamline loan would be for a new 30 year loan and approx. $900 in closing costs, $100 of it up front, saving us about $150 dollars a monthly payment.

    Now this sounds great to my wife and I but neither of us are even close to financial wizards so I guess if anyone can give us the pros and cons of what we are considering.

    Are there any specific questions we should be asking?

    Would agreeing to this type of loan change our escrow in any way?

    Does anybody know of specific online resources where I can do my own research?

    I appreciate any and all replies, suggestions and opinions.

    Thanks,
    Brian
     
  2. Tim Abbott

    Tim Abbott Second Unit

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    Brian......you absolutely need to refinance YESTERDAY!!!!!


    FHA streamline refinances are very common. The key thing is that your mortgage is currently on time. I am assuming that it is, otherwise your current lender (Countrywide) would not be offering to refi you. Also, there are absolutely no tricks or catches involved. The idea is that the refi is designed to reduce your payment. If you have been paying on time, they aren't going to ask for bank statements, paystubs, W2s etc.


    In regards to escrows....If you go with a lender other than Countrywide, they are going to require you to re-establish new escrows (likely several months of taxes and insurance). About 4 weeks after your current loan from Countrywide is paid off, they will return the balance in the escrow account from your old mortgage. This should approximately offset what you have to establish with the new lender, but I don't know if you can float the money for a few weeks.


    If you refi with Countrywide, ask them about an escrow balance transfer. The advantage you would have with Countrywide is that they may be able to grab the money in your old escrow account and use it to establish your new escrow account, letting you avoid coming up with the funds for a few weeks.


    If you qualify for a conventional mortgage, you may want to explore that avenue. You are going to have private mortgage insurance (PMI) with just about every FHA loan. A conventional mortgage may allow you to get rid of your PMI. If that is the case, you will get a good chunk of change back from the refund of your PMI. Not only that, but you would be looking at a slightly lower rate, as well.


    My advice is to find a good loan officer and talk through a couple of scenarios with them. They should be happy to explore all of the options and find out what is best for you.


    I hope I answered some of your questions. Do you have any more???
     
  3. Brian Mansure

    Brian Mansure Second Unit

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    Wow Tim, great reply!

    Actually we have tried not so long ago to re-finance under a conventional loan but were told up-front and honestly that our credit just wasn't up to snuff.
    Anyhow, when this offer came from Country Wide we thought it was probably the only way to reduce our interest rate without huge closing costs or credit approval.

    We really can't afford any significant up-front, out-of-pocket expense so this seems like a good way to go.
    I just didn't want to run into hidden costs or lock us into anything that would come back to bite us in the arse later. The loan officer said that the new 30 year loan wouldn't start until March of 2003 so we would keep paying our regular monthly payment on the 1st mortgage.

    Other than the escrow question can you think of other questions we absolutely should ask before signing the papers?

    Again, I really appreciate you taking the time to respond to my post.

    Thanks,
    Brian
     
  4. Tim Abbott

    Tim Abbott Second Unit

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    Brian, glad to help. The only other variable that you are going to need to take into account is the PMI aspect. When you initially took out your mortgage, you rolled a lump sum PMI figure into your loan (it would have been equivalent to 1.5% of your loan amount). The bulk of this amount will be refunded to you. Seeing as it has been 3 years or so, you will likely get something in the neighborhood of 75% of your PMI back.


    With the new loan, they will figure out what your new PMI figure should be (still the same 1.5%, only based on the new loan amount). They will then figure out what you will be receiving from your PMI refund. You will likely be responsible to come up with the difference. If this is already factored into your closing cost quote from Countrywide, then you should jump on this right away.


    6.25% is a great rate for an FHA mortgage. I would recommend getting this started before the holiday.


    Good luck!!
     
  5. Brian Mansure

    Brian Mansure Second Unit

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    Thanks once again Tim.
    We'll make sure to address the escrow and PMI questions
    with Country Wide but if all checks out we'll be signing the papers early 2003. They said that we'd have to keep paying on the original mortgage and the new streamline loan would start in March.
    Just curious Tim, do you work as a financial advisor or just have really good knowledge of loans and money in general. [​IMG]
    I really do appreciate your help.
    Have a Great Holiday!
    Brian
     
  6. Tim Abbott

    Tim Abbott Second Unit

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    I was planning on being a financial advisor, now I am a loan officer [​IMG]
    I couldn't ask for a better job. I'm glad to help out in anyway I can.
    Have a Happy Holiday yourself!!
    Tim
     
  7. Brian Mansure

    Brian Mansure Second Unit

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    And that my friends is why I love the Home Theater Forum...
    great people, good advice and DVDs all in one place. [​IMG]
    Brian
     

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