Streamline FHA Refinance Opportunity

Private Lending & Conventional Mortgage Advice
6yFollow

Streamline FHA Refinance Opportunity

Tim Crosby
Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes

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!

0Reply
18 views

Most Popular Reply

Zack KarpPro Member
Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
6y

@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!

847-387-5513
2Reply
See this reply in the discussion

13 Replies

Jump to latestLatest
  • Zack KarpPro Member
    Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
    6y

    @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!

    847-387-5513
    2Reply
  • Tim Crosby
    OP
    Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes
    6y

    Well it's good to know that it isn't a scam. That was my major concern! Now about this interest rate... they pulled my credit and said the low end was about 739. I think that's pretty good! I've already asked him to try and get that under 4%, which he claims to be doing, but he's also asking me to set a date for the closing. I'm holding out on that until I know exactly how low they're willing to go. Here's something else to consider... I am currently talking to another lender about being approved for a conventional mortgage for another property. How does that potential loan effect this streamline opportunity? I don't think it'd be a problem if it were a 20% down investment loan, but that's not what we're looking at right now. I'm currently in the process to be approved for a 5% down conventional loan which I believe has the same requirements as FHA - that I live in the home for a certain period of time. I wasn't planning on restructuring my current loan if we bought another house, so does it matter that I re-streamline current the loan? Does that reset the 1-year clock on my current FHA loan?

    0Reply
  • Zack KarpPro Member
    Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
    6y

    @Tim Crosby well the good news is that you can actually do a FHA streamline on an investment property. So you should be upfront with both lenders and let them know what you are doing. Which prompts the question, why are you working with 2 different lenders? If you aren't working with 1 lender that can handle all of your business the right way, give you great rates, help you with REI strategy, etc, then you are working with the wrong lender(s).

    847-387-5513
    1Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    6y

    @Tim Crosby you have some good questions above. Some quick informational bytes here:

    • Just about every lender can write an FHA streamline. Feel free to shop around.
    • You should be able to receive AT LEAST a "fee worksheet" but a "loan estimate" is better.  Both of those items will show the fees for doing this loan.
    • And 100% agree that using the same lender is always easier for the customer.  Would highly encourage you to ask whichever lender you like better to see if they allow "2 loans" at once and see what they say.

    Good luck!

    1Reply
  • Tim Crosby
    OP
    Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes
    6y

    @Zack Karp, yes I plan to keep everyone in the loop. The second lender was Village Capital. I was already in the process of applying for a second mortgage when they called me about the FHA Streamline. I didn't even know this was an option until the second lender called.

    0Reply
  • Tim Crosby
    OP
    Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes
    6y

    @Andrew Postell, I'm hoping to get that estimate to help shop around. My original lender is scheduled to call me later this week and I'll definitely be asking them about this!

    0Reply
  • Tim Crosby
    OP
    Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes
    6y

    Also, as an update, thanks to everyone for reaching out and answering these questions. I've gone from skeptical of this whole thing to focused on getting the most out of it. Which brings me to this - I asked for a rare under 4% and they've offered me 3.99% with my first payment due at closing. If anyone thinks they can do better, or better can be done by someone else, I'd love to talk to you! Also, what is the standard? What should I be asking for? Obviously, I'd love to get as low as possible, but I don't know where that bar is.

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    6y

    @Tim Crosby in realty you can always get a lower rate....but you usually have to pay for it.  Meaning there is some type of lender charge to get your rate lower and lower and lower.  That's why you need that "fee worksheet" so you can analyze "is getting X rate worth X fees".  It would be difficult to know what every lender can provide you without knowing all of your data.  So if you feel comfortable with those two lenders ask for a rate "with no points" and then whatever rate you think is best (3.99% for example) so you can compare.  Then compare the two lender against each other.  That's my recommendation here.

    1Reply
  • Tim Crosby
    OP
    Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes
    6y

    @Andrew Postell, I did ask them send me an estimate, which they just did today. As far as I'm aware, the only fee is the first payment being due at closing. Great advice though, definitely something to consider!!

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    6y

    @Tim Crosby you will 100%, guaranteed have more than "one payment due at closing" as a fee.  Even if they are providing a lender credit to cover the fees, they need to be able to show that on the fee worksheet.  You want to attach your fee worksheet here so we can review it?

    1Reply
  • Tim Crosby
    OP
    Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes
    6y

    @Andrew Postell I'd be happy to forward you this estimate, just not here. I'd prefer not to make my address public information. Lol. Message me your email address and I'll send you a copy.

    0Reply
  • Tim Crosby
    OP
    Rental Property Investor · Winter Haven, FL · Member since 2018 · 68 posts · 20 votes
    6y

    Okay, another update! I've now gotten my original lender to look this over, she says the loan looks good but the problem is with my original loan. This is only an estimate and doesn't take into account the fact that I got Down Payment assistance to get the house. She tells me that in order to refinance, I would first have to repay that assistance. That adds to the closing costs!

    Also, she believes this particular lender is reading the current FHA guidelines wrong. She says that my loan is asking for $145,882 but current guidelines say the limit for me is $143,382. That difference of $2,500 would also need to be paid at closing.

    So, assuming all that's right, and I don't have any reason to believe it isn't, there are a lot of hidden fees here, not necessarily applied by the lender, but by the FHA guidelines themselves.

    Of course, everyone has an opinion, she knows my particular situation better than most, so I tend to think she's correct. Let me know if this makes sense to you guys as well. Considering all this, having to pay that original down payment (about $5,000) and the difference in the allowable loan amount ($2,500) PLUS the first payment of about $1,040... all turns this into a $8,540 investment to save $80 per month.. it would take over 106 months, or just over 9 years to recoup those costs.. doesn't sound like such a good deal any more lol

    0Reply
  • Todd Ashley
    Rental Property Investor · Portland, OR · Member since 2015 · 96 posts · 23 votes
    5y

    @Tim Crosby

    Just found this thread as I was offered an FHA Streamline Refinance today. What did you end up doing?

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free