California FHA Streamline Refinance guidelines received a boost recently, a boost in the right direction for most borrowers. Turns out for the past 7 months, since November 17, 2009 the majority of FHA lenders have misinterpreted their investors’ needs for proper documentation.
Since November, Streamline FHA refinances have had traditional guidelines – prove income, provide tax returns, make sure the debt ratios are in line amongst others. As of June 9, 2010, many investors have informed their lenders that those guidelines have eased and frankly have been eased all along.
What does this mean to you and why is it important?
With most lenders, income documentation for wage earners and self employed borrowers is no longer required. Tax returns are no longer necessary. Debt ratios are a non-factor. You must still be employed as it will be verified.
Income documentation for those other than wage earners and the self employed include the following:
FHA Streamline Refinance Income Documentation Requirements
| Income Type | Documentation Requirements |
|---|---|
| Salaried/W-2 | Verbal VOE |
| Self-Employed | Verification of self-employed Borrower’s business is required |
| Alimony/Separate Maintenance/Child Support | Copy of divorce/decree settlement agreement or court payment record. |
| Annuity | Most current institutional statement |
| Interest/Dividend Income | Documentation showing ownership of interest bearing account or copy of current statement showing interest income. |
| Note Income | Copy of Note or most current statement |
| IRA/Keough | Most current bank statement or letter from administrator |
| Pension/Retirement | Most current bank statement or benefit award letter or most current 1099 |
| Rental income | Copy of current lease |
| Social Security/Retirement /Survivors/Disability | Award letter or most current deposit statement |
Standard FHA Streamline Criteria
The following items are necessary to refinance:
- Seasoning – At the time of loan application, the borrower must have made at least 6 payments on the FHA-insured mortgage being refinanced.
- Mortgage Payment History Requirements. The following requirements must be met without exception:
- Loans with a 12 month payment history: 0×30 lates in the previous 12 months.
- Mortgages with less than 12 months payment history: the borrower must have made all payments within the month payment is due.
- Net Tangible Benefit (NTB) Requirements: A net tangible benefit for the borrower must apply defined as one of the following:
- Reduction in the total mortgage payment (PITIA) AND ALL SUBORDINATE LIENS = The new total mortgage payment must be 5% lower
than the current total mortgage payment on the loan being refinanced. This requirement is only applicable when refinancing from a Fixed
Rate to Fixed Rate, a GPM to Fixed Rate, a 203k to 203b and a 235 to 203b. - Refinancing from an ARM to a fixed rate mortgage =
- The interest rate on the new fixed must not be greater than 2 percentage points above the current rate on a 1-year ARM.
- For hybrid ARMs, the total mortgage payment on the new fixed rate mortgage may not increase by more than 20%
- Reduction in the total mortgage payment (PITIA) AND ALL SUBORDINATE LIENS = The new total mortgage payment must be 5% lower
With the recent downturn in Mortgage Rates for California, the majority of FHA borrowers are seeing obtainable rates at or below the 5% level. This is a huge help for those that are in need of refinancing, want a quick alternative, require less documentation, less headache and want to take advantage of the lowest rates ever!
Who do you know right now that is in need of refinancing a FHA loan? Call for a free mortgage analysis.
{ 2 trackbacks }