FHA Refinance Transactions

Purpose of Refinance
A refinance transaction involves repayment of an existing real estate debt from the proceeds of a new mortgage that has the same borrower(s) and the same property. The borrower must have legal title to the property being refinanced.


Refinance transactions are seperated into four categories.

1. Fully documented cash-out refinances
2. No cash-out refinances (credit qualify)
3. Streamline refinances without an appraisal
4. Streamline refinances with an appraisial

Note:"Streamline" is a refinance of an exisiting HUD guaranteed loan. There cannot be any cash-out in excess of $250.00. Any additional funds, must be applied to the principle balance.

I. Cash-out Refinances-Must be Owner Occupied ONLY!

A. MaximumLTV of 85% based on appraised value plus NRCC and discout points if seasoned one year. If under one year seasoned, base LTV on lessor of appraised value/original price at 85%, May include allowable closing costs, but NO prepaids.

B. Debt consolidations are watched carefully, as they represent considerable risk.

II. No Cash-Out Refinances-Must be Owner Occupied ONLY.

A. If seasoned one year, maximum loan amount is less of:

a. Appraised value x 97.75%, or 98.75% if appraised value is less than $50,000.

b. Appraised value + closing costs and Discount points x 95% + $500 or 90% + $6,750 if loan amount is over $125,000.

c. Exisiting Indebtedness (can include 30 days interest) plus any subordinate liens (one year seasoning or document funds used for repairs), prepayment penalities, plus allowable closing costs, prepaids, discount points, less any MIP refund (if first trust deed is an FHA lien).

Note: For the purpose of refinance transactions, the definition of "prepaids" is per diem interest to the end of the month on the new loan, impounds for hazard insurance, taxes and MMI.

B. If seasoned less than one year, limited to lesser of above calculations plus:

Appraised value or original sales price, plus allowable costs-Documented repairs may be added.

Note The Streamline Refinance is designed to lower the monthly principle and interest payments on a current HUD loan with NO cash back to the borrower. Streamline refinances can be done without an appraisal if costs are NOT included. If cost are included an appraisal IS required.


III. Streamline Refinance -Without Appraisal

A. Payoff exisiting FHA Principle Balance only (no financing of closing costs, prepaids, exisiting interest or discount points) less MIP refund- Refund not applicable if property is a Condo. Some costs may be financed per mortgagee letter 2001-12.

B. Non-owner and second homes allowed.

C. Term is lessor of 30 years or un-expired term plus 12 years.


IV. Streamline Refinance- With Appraisial
(HUD appraisal only, indicate "Streamline" in order to eliminate any repair requirements)

A. Payoff exisiting Indebtedness (can include 30 days existing interest) only, plus closing costs, prepaids and discount points.

B. Loan amount based on the lesser of:
a. appraised value x 97.750% (98.750% if value is $50,000.00 or less)
b. appraised value plus costs x 95% plus $500.00 or 90% plus $6,750 if loan amount is $125,000.00 or more
c. existing Indebtedness (as #1 above) less MIP refund-no refunds on Condos
d. Refinance Maximum Mortgage Worksheet (See Attached)


C. The new mortgage may not exceed the original mortgage unless:
a. the mortgage payment record is satisfactory
b. borrower(s) reflects regards for credit evidedenced by TRW
c. or payment and rate are decreasing


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