About Government Refinance and Home Purchase Programs

We sometimes get asked if there are really no cost refinances out there or if that is simply marketing spin by banks. The short answer is yes, no cost refinances do exist, but they are more rare than many lenders imply with their advertising.

As the old saying goes, there is no such thing as a free lunch. In this case there is technically no such thing as a truly “no cost” refinance because either the lender has to pay for the costs of a refinance or you do. However there are cases when lenders are willing to pay for all of your closing costs on refinances so it can be no cost to you. Lenders are able to do this because on most loans they are being paid a commission or finders fee for the mortgage by their investors. So for example, if an investor is willing to pay a lender $3000 for servicing rights to your new government-backed mortgage the lender can pay $2000 of your closing costs and still not lose money on the transaction.

Most likely no-cost mortgages

– FHA streamlines for FHA loans that were closed more than three years ago. If you have an FHA loan that you got in the spring of 2009 or earlier you could qualify a real no-cost FHA streamline refinance. For people in this situation the FHA has waived virtually all of the upfront mortgage insurance fees and does not allow any other closing costs to be rolled into the new loan. This results in a refinance that really does significantly reduce interest payments and payments without costing borrowers anything. Contact us to learn more about this program if you currently have an FHA loan.

– Most other types of refinances with slightly higher interest rates. For other types of refinances the most likely way to get a no cost refinance is to get a rate that is a quarter point or more higher than than average. For instance if the average mortgage rate is 3.75% you can normally get most or all of your closing costs paid for by the lender by going with a 4.0% rate. The higher interest rate gives lenders more money to pay for costs, including both the up front out of pocket expense and the costs rolled into the loan. It doesn’t always make sense to go for higher interest rates and lower closing costs though because the longer you own the property the more valuable the lower interest rate becomes.

Out of pocket costs vs. costs rolled into the loan.

Sometimes lenders will tell you that if you bring no cash to closing that it is a “no cost” refinance. But if closing costs are rolled into your new mortgage there are still costs to you. If $5000 in closing costs get rolled into your new mortgage that means you are $5000 deeper in debt and you still have to pay that money back eventually. It is important to calculate the actual costs and the number of months it takes to break even on those costs before proceeding with a refinance. (*Contact us to be connected with authorized lenders who always help borrowers calculate break even costs.*) Normally if you plan to own the house 5+ years you should be alright with a break even point of less than 2 years on a refinance but the faster you can break even the better.

Fill in the contact form on the right to get more information on this topic or to find out which government-backed refinance programs you can qualify for. With rates at all time lows this month there may never be a better time to refinance your mortgage.

As predicted, the new FHA streamline program that launched in June created a massive stampede of FHA streamline refinances over the last month or so. But as we approach August the flood of refinance applications is slowly subsiding while interest rates on government-backed mortgages continue to drop to new all-time lows.

If you have an FHA loan contact us today to see about streamlining your mortgage to a new FHA loan in the mid to high 3’s. Likewise, if you have a conventional or VA loan fill in the contact form on the right to get a quote for a new refinances at surprisingly low interest rates. With rates at all-time lows again it is starting to make sense for more and more people to take another look at refinancing. And with the backlogs in underwriting starting to ease finally the wait times on many government-backed loans won’t be as long in the latter half of the summer as they have been in the first half.

As the European debt crisis slogs along, mortgage interest rate in the US continue to test new lows. Unfortunately the number of borrowers who are able take advantage of the record low rates seems to be shrinking. While borrowers who have equity, solid credit, and enough income can still refinance to the record low rates through authorized lenders on our list, it is becoming more difficult for borrowers who are underwater on their mortgages to refinance. Fewer and fewer lenders are participating in the main refinance programs targeted toward underwater borrowers, the FHA streamline program and the HARP program. Part of the problem is lenders are leery about adding new upside-down mortgages to their books. The launches of the new FHA streamline program and the HARP program have sent many thousands of underwater borrowers in search of refinances from these programs and as a result of the popularity of these programs many banks simply have lost their appetite for funding such loans. If the problem persists the federal government might have to come up with greater incentives for lenders to participate in these programs because the programs will not do any good if none of the authorized lenders are willing to participate.

The good news is that some authorized lenders are still participating in both programs and it is still possible to get an FHA streamline or a HARP loan… for now. But with the retreating we are seeing among most authorized banks recently there is not telling how long both programs will be available. The HARP 2 program is already available among so few lenders that in many cases where the home is significantly underwater borrowers are looking at waits of three or more months to close their HARP 2.0 loan. With any luck the FHA and Fannie/Freddie will step up to make these programs more appealing and less risky for lenders soon.

In the meantime, contact us in the sidebar today to learn more about which programs are the best fit for your family. All of the government-backed refinance programs are still available for now so getting going now while rates are testing new lows is probably a very good idea.

As we have discussed in the past, the new FHA streamline program that went live June 11 is hugely beneficial to families who have FHA loans that are more than three years old. Well the expected stampede to participate in the new program is underway and several large FHA-approved lenders have decided they need to place limits on the number of FHA loans they are refinancing and servicing. The end result of this pullback by banks is likely to be that FHA streamlines will soon have higher interest rates and will be harder to come by. If you have an FHA loan that is more than three years old contact us in the sidebar right away. From the looks of things this new program with the record low interest rates might be much harder to get in the next few days.

The much-anticipated new FHA streamline program for people who have FHA loans that were started prior to May 2009 goes live Monday June 11th. With interest rates testing all time lows this new program is a good idea for virtually every home owner who qualifies. Not only can the interest rate be lowered to somewhere between 3.75% and 4.0% right now, this new program adds nothing to the loan amount and normally allows borrowers to skip at least one mortgage payment. The other benefit of the FHA streamline program is that it doesn’t matter how underwater borrowers are on their current FHA mortgage as long as there are no 30-day late payments in the last 12 months. Add to that the fact that borrowers will also receive a refund check for the amount in their current escrow account and there is no downside at all for most qualified borrowers. Again this program only applies to people who already have FHA loans that are more than three years old. But for that segment of the population taking advantage of this new program is the proverbial “no-brainer”.

Be ready for longer than usual closing waits with this new program though. Because the new program is so beneficial to qualified borrowers millions of homeowners will be seeking these FHA streamlines this summer. Folks who get started right away should expect to close their streamline loan in July. But plan for about six weeks for the refinance process in June and July until the initial rush dies down.

If you have an FHA loan you got prior to May 2009 contact us in the sidebar right away to get an estimate on this new FHA streamline program. If not, you can still contact us to learn more about other available government-backed refinance programs.

The new FHA streamline program for borrowers who currently have FHA loans more than three years old is starting in just a few weeks. As we have noted in the past, this new program is dramatically more beneficial to borrowers than the previous FHA streamline program because the upfront FHA fee will be waived and the monthly FHA mortgage insurance will no longer be doubling.

As if the launch of this new FHA program weren’t enough good news, add to that the fact that mortgage interest rates on FHA loans are testing all time lows recently. We are hearing of qualified borrowers with excellent credit locking in rates as low as 3.75% on new 30 year fixed FHA loans this week in anticipation of closing in mid June after the new program launches. (Note: rates on FHA loans are lower than rates on HARP loans right now.) If you know of anyone with an FHA mortgage that they got prior to May of 2009 — no matter how upside down/underwater it may be — have them contact us in the sidebar right away. We don’t anticipate this current dip in mortgage interest rates will last long.

The new FHA streamline program that was recently announced is set to go live in just over a month. Homeowners who got their current FHA loan prior to May of 2009 are eligible. The new program allows borrowers to replace their existing FHA loan with a new FHA loan at the current low interest rates without increasing monthly PMI, without adding any money to the loan balance, and without any closing costs. The FHA will start accepting these new streamline loans after June 11, 2012 but borrowers can begin the application process now in anticipation of the new program. If you have an FHA loan that is three years old or older contact us in the sidebar to learn more about this excellent new program.

In early April of 2012 the FHA will be dramatically increasing their upfront and monthly mortgage insurance premiums. These increases will affect all new FHA purchase loans, conventional-to-FHA refinances, and refinances from one FHA loan to another FHA loan (called FHA streamlines) when the current FHA loan is less than three years old. If you have an FHA loan that you got after April of 2009 contact us right away in the sidebar to look into dramatically reducing your interest rate through the FHA streamline program before the new higher fees kick in. After April 9, 2012 it will be virtually impossible to streamline an FHA loans that is less than three years old.

For FHA loans that are more than three years old there is a new program that was just announced that is extremely beneficial. It allows FHA streamlines of those older FHA loans at virtually no costs and without increasing mortgage insurance fees. While the April 9 deadline on FHA streamlines does not apply to FHA loans that are from April of 2009 or older, contact us in the sidebar if you have one of these older FHA loans as well to learn more about that terrific new program that was just announced.

President Obama had some terrific news this morning pertaining to Americans who currently have FHA loans. FHA loans that were originated prior to June of 2009 will now be allowed to streamline to a much lower interest rates WITHOUT adding a large upfront FHA mortgage insurance fee and without increasing the monthly mortgage insurance fee. This means that streamlining your FHA loan should be an absolute no-brainer if you are in that pre-June-09 category. Contact us in the sidebar now to learn more about this new FHA streamline program.

For FHA loans originated after May 2009 the options are more limited and the clock appears to be ticking. The FHA is planning on significantly increasing its mortgage insurance fees on all FHA loans originated after April 9, 2012. So if you have an FHA loan at a rate of 5% or higher that you got after May of 2009 contact us in the sidebar ASAP as well to see if you can streamline to a better rate before the pending FHA mip rate increase this April.

Note: If you don’t have an FHA loan there are programs available for borrowers with conventional loans or VA loans as well.

As has been predicted recently the FHA is poised to raise their upfront and monthly mortgage insurance fees once again starting on April 1, 2012. For FHA home purchases and for refinances from non-FHA loans into FHA loans the monthly mortgage insurance fee will go up by 10 bps (annualized) and the one-time up front mortgage insurance premium will jump from 1% of the loan amount to 1.75%.

The good news is that refinancing from one FHA loan to a better FHA loan through the FHA streamline program will reportedly not be subject to these new increased fees. That will be a major help to borrowers in FHA loans already.

If you have an FHA loan now at more than a 5% interest rate contact us in the sidebar to learn more about the FHA streamline program. With the streamline program borrowers can refinance to a much lower interest rate without having to pay the standard closing costs, get an appraisal, or even provide detailed income paperwork in most cases. The FHA’s logic is that if a borrower can avoid 30 day late payments and maintain a credit score of more than 640 at the higher interest rate, the borrower can do so even more easily at a lower interest rate. Contact us in the sidebar to learn more about this and the other available government-backed refinance programs.

In a speech given in Orlando today an official with the Federal Housing Administration indicated that the FHA is planning to increase its monthly mortgage insurance fees again. We get this from a recent HousingWire story on the topic:

The Federal Housing Administration will announce additional premium changes to its mortgage business and streamlined refinance programs in the coming days.

FHA Acting Commissioner Carol Galante said in a speech at the Mortgage Bankers Association servicing conference in Orlando, Fla., Wednesday that the changes are on their way.

As part of the payroll tax extension agreed to last fall, the FHA will raise premiums on its forward mortgages by 10 basis points and by 25 bps for jumbo loans.

If you have an FHA mortgage with an interest rate of 5% or higher contact us in the sidebar to learn more about the FHA streamline program. With rates on 30 year fixed loans sometimes as low as the high threes in recent weeks now is an excellent time to look into the FHA streamline program. The FHA streamline program lets responsible borrowers who have FHA loans now replace their current 30 year fixed FHA loan with a new 30 year fixed FHA loan at a much lower interest rate without requiring an appraisal or income verification. So with FHA streamlines it doesn’t matter how underwater the borrower is. But the monthly mortgage insurance premium already significantly increased for FHA loans last year and if it gets much higher it will be harder to streamline.

Contact us in the sidebar to learn more about this program and the other government-backed refinance programs available.

All FHA loans started on Monday April 18th, 2011 or later will have higher monthly mortgage insurance fees than loans started the previous Friday. The FHA is raising its monthly mortgage insurance fees by 0.25% across the board beginning then. The fees will not be retroactive but will apply to all new FHA refinances or purchase loans.

Here is what a 0.25% mortgage insurance fee would mean:

On a $150,000 30 year fixed FHA loan the monthly insurance fees will cost an additional 0.25% per year. That means the insurance fee would be $31.25 per month higher than the same FHA loan started the previous week. ($150,000 x .25% / 12 = $31.25). On a $250,000 FHA loan the mortgage insurance fees would jump $52.08 per month.

So these fee hikes can be significant and the larger the loan the more of a difference the change will make. If you have considered an FHA loan or if you already have an FHA loan you would like to streamline to a lower rate it would be wise to at least start an FHA loan application by Friday April 15 in order to avoid mortgage insurance fee hike. Contact in the sidebar for details on how to get started.