FHA describes a net tangible benefit as a reduction of principle, interest, and mortgage insurance payments by 5%. Most FHA mortgage holders typically save a bit more than that, but for the sake of discussion let's make it easy. For many FHA Homeowners, a 5% reduction in their mortgage equates to about a 1.5% increase to their income. It's true! No one would turn down a raise would they? Now let's look at the totals. There are about $575 Billion in outstanding GNMA (Government National Mortgage Association) loans which are comprised of FHA and VA mortgages. If each of the payments on those mortgages were to be reduced by 5%, it would result in aggregate savings of approximately $1.8 Billion per year. FHA streamline Nevada benefits will give you a reason to think about a refinance.
Is the 5% rule perfect? No, in fact, like most rules it has limitations and imperfections. It doesn't account for cost. Some may be denied for an FHA Streamline Refinance with absolutely no costs at all because it only reduces the payment by 4.99%. In contrast, others may be approved for a loan with exorbitant closing costs that saves 5.01%.It doesn't allow for shortening the term of the mortgage. Some homeowners would likely see a real benefit in reducing their 30 year loan to a 15 year mortgage with a very modest increase to their payment, but not with the modern streamline program.
So, if you took out an FHA mortgage a few years back at 6.5%, and can refinance to a new Streamline FHA mortgage at 3.75%, that is a savings of $338 per month, since your MI will remain what it was back then. That is worth doing. There are just three things to keep in mind to make sure that you qualify for the new FHA streamline refinance program with the lower MI.
Are there any other Net Tangible Benefits? While the 5% rule is all that HUD seems to be concerned with, there are many other benefits. Everyone understands that lower rates generally equal lower payments, but most overlook the fact that a lower rate also results in a larger portion of the payment being applied to principle, building equity faster. The mortgage insurance will also terminate sooner rather than later. FHA Mortgage Insurance cancels when the loan to value ratio (LTV) reaches 78% of the original mortgage balance. This happens much faster with a lower interest rate. It is somewhat common to reach the 78% threshold 1-4 years early. Many borrowers are permitted to skip a mortgage payment in the process, without penalty.
Mortgage brokers are required to be licensed in each state they conduct business. Clients must sign a contract authorizing brokers to act as their agent. Mortgage brokerage fees are charged in addition to loan application, origination, and closing settlement fees. It is a great idea to look around and compare mortgage brokers and refinancing fees. It is best to calculate all costs before going through with your refinance. If you are looking to refinance check out a FHA streamline Nevada refinance loan today.
Is the 5% rule perfect? No, in fact, like most rules it has limitations and imperfections. It doesn't account for cost. Some may be denied for an FHA Streamline Refinance with absolutely no costs at all because it only reduces the payment by 4.99%. In contrast, others may be approved for a loan with exorbitant closing costs that saves 5.01%.It doesn't allow for shortening the term of the mortgage. Some homeowners would likely see a real benefit in reducing their 30 year loan to a 15 year mortgage with a very modest increase to their payment, but not with the modern streamline program.
So, if you took out an FHA mortgage a few years back at 6.5%, and can refinance to a new Streamline FHA mortgage at 3.75%, that is a savings of $338 per month, since your MI will remain what it was back then. That is worth doing. There are just three things to keep in mind to make sure that you qualify for the new FHA streamline refinance program with the lower MI.
Are there any other Net Tangible Benefits? While the 5% rule is all that HUD seems to be concerned with, there are many other benefits. Everyone understands that lower rates generally equal lower payments, but most overlook the fact that a lower rate also results in a larger portion of the payment being applied to principle, building equity faster. The mortgage insurance will also terminate sooner rather than later. FHA Mortgage Insurance cancels when the loan to value ratio (LTV) reaches 78% of the original mortgage balance. This happens much faster with a lower interest rate. It is somewhat common to reach the 78% threshold 1-4 years early. Many borrowers are permitted to skip a mortgage payment in the process, without penalty.
Mortgage brokers are required to be licensed in each state they conduct business. Clients must sign a contract authorizing brokers to act as their agent. Mortgage brokerage fees are charged in addition to loan application, origination, and closing settlement fees. It is a great idea to look around and compare mortgage brokers and refinancing fees. It is best to calculate all costs before going through with your refinance. If you are looking to refinance check out a FHA streamline Nevada refinance loan today.
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