How About an FHA Streamline Refinance?

One of the smartest ideas remaining in the FHA and VA programs is the concept of streamline refinancing.

Essentially the idea is that if you can afford your current mortgage you can surely afford your current mortgage if the monthly payments are reduced.

The elevator pitch of a streamline refinance is that if you have an existing FHA or VA loan, you don't have to go through the traditional red tape that you previously went through when you first obtained your FHA or VA loan. The result is that with a streamline refinance there are relatively few application requirements, and the time in doing so can be very quick in comparison to what you were accustomed to the first time you obtained an FHA or VA loan.

Note that with a streamline refinance you can get either a new 30-year term or you can add 12 years to your current loan term. Making a loan longer at the same rate or a lower rate has the effect of reducing the monthly cost for principal and interest.
How few?

Just look at what HUD now says in its latest update regarding the FHA streamline program:
Streamline refinances are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage and must involve no cash back to the borrower, except for minor adjustments at closing not to exceed $500. Streamline refinances can be made with or without an appraisal. FHA does not require repairs to be completed (except for lead-based paint repairs) on streamline refinances with appraisals; however, the lender may require completion of repairs as a condition of the loan. The mortgage amount limits may never exceed the statutory limits except by the amount of any new upfront MIP.

Streamline refinance processing and underwriting instructions are described in HUD Handbook 4155.1 REV-5 1-12 but are generally as described below. The mortgage amount limits may never exceed the statutory limits except by the amount of any new upfront MIP.
A. Streamline Refinances WITHOUT an Appraisal. The maximum insurable mortgage is the lower of the two calculations shown below:

1. Original Loan Amount: The original principal balance on the mortgage (which will include any upfront mortgage insurance premium) plus the new upfront premium that will be charged on the refinance, or

2. Existing Debt: Add the sum of the existing FHA insured first lien, closing costs, reasonable discount points and the prepaid expenses necessary to establish the escrow account, and subtract any refund of upfront mortgage insurance premiums (UFMIP). The existing first lien may include the interest charged by the servicing lender when the payoff is not received on the first day of the month as is typically assessed on FHA mortgages, late charges or escrow shortages, but may not include delinquent interest.

This mortgage calculation process applies only to owner-occupied properties. Investment properties, even if originally acquired as principal residences by the current borrowers, may only be refinanced for the outstanding principal balance.

The term of the mortgage is the lesser of 30 years or the remaining term of the mortgage plus 12 years.

B. Streamline Refinance WITH an Appraisal (No Credit Qualifying). The maximum insurable mortgage is the lower of the appropriate loan-to-value ratio applied to the appraiser’s estimate of value or the sum of the existing indebtedness and related closing costs and prepaid expenses for the refinance; both are described below.

1. LTV Ratio Applied to Appraised Value: Multiply the appraised value of the property by the appropriate factor as shown in the chart in HUD Handbook 4155.1 REV-5 (1-12) for the property’s value and the State where it the property is located.

2. Existing Debt: Add the sum of the existing FHA insured first lien, closing costs, reasonable discount points and the prepaid expenses necessary to establish the escrow account, and subtract any refund of upfront mortgage insurance premiums (UFMIP) as described below. The existing first lien may include the interest charged by the servicing lender when the payoff is not received on the first day of the month as is typically assessed on FHA mortgages, late charges or escrow shortages, but may not include delinquent interest.

$8,000 Tax Credit to buy a home in 2009

If you are a first time home buyer or you haven't owned a home as a primary residence for the past three years and you or that someone you know is considering buying a home this year as your primary residence, this is the most lucrative year to add to your list of tax deductions you could ask for. This is the year and the reason to be grateful for the administration that is in Washington.

In the real life of monopoly, you will pick up a free $8,000 from the United States government. Free Money as a deduction on your 2009 tax returns.

This is your lucky year to buy a house.

In addition to the $8,000 tax credit, there are grants available to buy houses to stimulate local economies. These are free grants that can be used as down payment money &/or closing costs.

Details of the Tax Credit are below.

2009 First-Time Home Buyer Tax Credit Fact Sheet

Who is Eligible

The $8,000 tax credit is available for first-time home buyers only.

• The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase.

• All U.S. citizens who file taxes are eligible to participate in the program.

Payback Provisions

The tax credit is a true credit. It does not have to be repaid. The only repayment requirement is if the home owner sold the home within three years after the purchase.

Income Limits

Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000.

• For married couples filing a joint return, the income limit doubles to $150,000.

• Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.

• Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.

• The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with a MAGI that exceeds $170,000.

• For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government.

• If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit).

Effective Dates for the Tax Credit

First-time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.

• Buyers can take the tax credit on their 2008 or 2009 income tax return.

Tax Credit is Refundable

A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference.

Types of Homes that Qualify for the Tax Credit

All homes, whether single-family, town homes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a principal residence in the prior three years. This also includes newly-constructed homes.

For more details on the tax credit, go to www.federalhousingtaxcredit.com