FHA Streamline cons?

Question

Hello, Wondering if anyone has any experience with the FHA Streamline refinancing process? We have a triplex under FHA that is now fully rented (no longer owner occupied). We keep getting calls, emails, and snail mail from our mortgage company about doing the FHA streamline to reduce interest rate/payments. I’m told they wouldn’t need to do a hard credit pull, however not sure how it looks to banks. We are anticipating buying another property in the next few months (likely a conventional mortgage) and not sure if we do the streamline for our current property if this would mess up being able to qualify for a new mortgage for a new property shortly after?

Chris Mason · Answer

If your rate starts with 4, and your FICO does not start with 5 or 6, you should probably refinance.

Zack Karp · Answer

@Mark Bills you absolutely do not need to live in ANY of the units to do a FHA streamline, the property can be an investment property.  Either that rep doesn't know what they are talking about, or that lender has an overlay, meaning they won't do those loans unless they are owner-occupied.

Mark Bills · Answer

Hey @Todd Ashley,

I have an FHA loan and I also received a refinance option in the mail from homebridge. I was also told to skip my mortgage payment for the month of January. I had my lender look at it and I was advised not to do it because I was close to 80% LTV to which I can refinance out to a conventional loan. Getting a second or even third eye on your offer is never a bad idea.

Todd Ashley · Answer

@Mark Bills

Thanks for your input! I believe I am still pretty far off from hitting 20/25% equity. I purchased the property less than a year ago for ~$535k with 5% down. Current value is somewhere in the neighborhood of $600k. I am currently in the process of buying a different property, so I don’t have the capital to make up the difference in equity.

Todd Ashley · Answer

@Zack Karp

I also just received an FHA Streamline Refi offer. It would take my rate from 3.5 to 2.5 and reduce my monthly payment by $284. $6,000 to cover the fixed costs will be tacked onto the loan. The way he explained it is that I would skip two mortgage payments, but that I would have closing costs equal to or less than a mortgage payment. Does this sound right?

Mark Bills · Answer

I also received a letter and  I just  spoke to a rep, but before I agree to the program I want to do my due diligence.

@Andrew Hagmann I was told by the rep. that this can only be done on a owner occupied property, I have a duplex so I qualify as I technically still live in one of the units.

Zack Karp · Answer

@Andrew Hagmann yes you can absolutely do a FHA streamline even on a property that's no longer your primary residence.  FHA streamlines are allowed on investment properties.

Andrew Hagmann · Answer

@Zack Karp late to this thread but curious. Can you still do an FHA Streamline if you don't live in one of the units anymore? I'm in a similar boat. Still occupy one side of a duplex purchased with FHA but may be moving out soon.

Zack Karp · Answer

@Amy VE no that will not mess you up, if anything it will help improve your situation with qualifying in the future.  Just make sure that don't get hosed.  Stay away from the big banks, most of their FHA rates suck.  You should be able to get a rate in the low-to-mid 3's with minimal (if any) closing costs, and don't fall for the "skip 2 payments" line unless you want to actually take a little bit of cash out (which there are ninja ways to structure it to do so).  There are ways to structure this for a better short term or long term result.  As with any mortgage, make sure you are working with a rockstar LO who is looking out for YOUR best interests, not theirs.

Best of luck!

FHA Streamline cons?

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