Streamline FHA Refinance Opportunity

[Tim Crosby]

Hey, so about 2 weeks ago I was contacted by a company, Village Capital, who said they wanted to help me by refinancing my current FHA mortgage down to a lower interest rate. They said they could offer me this because it was coming up on a year for my current loan through US Bank and because I hadn't missed any payments, they might be able to help lower my payment. After more discussions with this representative, they told me they could get my rate down from 5.5% to 4.25% and their estimates are that this would save me close to $100 a month on the mortgage. This particular property is an FHA loan and I am currently living there, but it's a duplex and I'm looking to leave for a more permanent residence soon, making it a total investment property. Because of all this, that extra $100 just adds to the monthly cashflow and looks like a great deal, but that's what worries me! As they say, "if it sounds to good to be true, ask the people on BP!" Let me know what you guys think about all this. Is this common? Does it sound like a scam?? I looked them up on BBB, they have a B rating, but the complaints are all about how slow they are, not that it's a scam or anything like that. Again, just let me know what you guys think. Thanks!

[Zack Karp]

@Tim Crosby FHA streamline refis are not a scam, but you have to make sure the loan officer is structuring it right for your situation. There are companies out there that advertise "no cost" which in itself is a violation. There are always closing costs, the question is, who pays them. Either the borrower, or the lender. When the lender pays them, it means they bake it into giving you a higher interest rate. So then the question is, what are your goals? Do you plan to have this FHA loan for more than 5 years? If so, then you are usually better off getting the lower rate and paying the costs because the breakeven point is usually around 5 or so years. If you are planning on selling the property, or refinancing to a Conventional loan in the next 5 years, then you are better off taking the higher rate and having the lender pay the costs.

This is one of many strategies that most loan officers don't take the time to discuss, or they don't know, or simply don't care.  Make sure to align yourself with a rockstar LO that has YOUR best interests in mind.  FWIW, 4.25% seems a little high, unless your credit score is low.  But without knowing the whole picture, it's hard to say.  Might be worth looking at another lender.

Best of luck!