How many of us would love to refinance but are unable to do so because we’re “under water” on our mortgage? In other words, we owe more than our home is worth! Well if you’re one of the lucky folks that utilized an FHA loan when you purchased your home, your equity position is not a factor in being able to refinance. As a matter of fact, as long as you have at least a 640 credit score and have not been late on your mortgage in the last twelve months, you qualify for an FHA Streamline refinance and no appraisal is required!! What is required is that the new mortgage better your position. What I mean by this is you must benefit from the refinance either by reducing your payment or reducing your term (i.e. going from a 30 year fixed to a 15 year or 20 year fixed). I believe FHA’s reasoning behind offering these very easy to qualify for loans is that FHA is already exposed on the loan. So why not improve the odds that you’ll continue to make your payment?

Here’s a reason to act before the end of September. Beginning October 4, 2010 FHA is increasing their monthly mortgage insurance premium charged on all new FHA loans. So this means, if you submit your application after October 4th your mortgage payment will be higher for the same loan. The higher monthly mortgage insurance could end up eating away at some of the savings you’ll experience by taking advantage of our historically low rates. Rates for an FHA Streamline are being offered around 4.5% (depending on your credit score). So when you couple the incredibly low interest rates we’re experiencing with the upcoming increase to the monthly mortgage insurance . . . now is definitely time to look at refinancing your existing FHA mortgage.

So you know rates are low and now know it’s best to act before October 4th. I’m sure the next question in your mind is “what is this going to cost me?” Well most of your closing costs can be rolled into the loan. How much depends on how long you’ve had your existing FHA loan. FHA has their own calculation for determining the new loan amount. So to answer the question, on the low side your cash to close my be zero to couple of hundred dollars. On the high side you might be bringing to closing a mortgage payment. Regardless of how much you do or do not have to bring in to closing you will skip a month before your new mortgage payment is due. So if you submit an application now, your loan would close by the end of October and your next payment would not be due to December. Skipping a mortgage payment can help offset the cost if you do have to bring in more than a couple hundred dollars to closing. Remember you won’t be making a November payment!

Please call me today if you’d like me to work up what your savings could be on an FHA Streamline. I’d be pleased to show you ALL the numbers so you can decide for yourself. And hey, congratulation on taking an FHA loan to begin with. Bet you didn’t realize you were making such a wise decision when you decided to go FHA.

Please call me at my office (623/434-4665) if I can be of assistance to you or anyone you know looking for any type of mortgage.