FHA Mortgage Tighter Restrictions – Part 2

Part 1 | Part 2

In part one of this blog, I discussed the GREAT, and GOOD points of the FHA mortgage program‘s tighter restrictions. The following are some of the not so good, or the BAD and UGLY side of these restrictions:

The Bad: FHA will now require for all streamline refinances the borrower has made at least 6 mortgage payments on their current loan.  (Although not a bad new requirement, all of the mortgage payments must have been mad in the month due if current mortgage has less than 12 mortgage payments made)

The Bad: FHA will not allow any streamline refinance of an investment property or second home to be into an adjustable rate mortgage.  FHA only allows investment properties or second homes in their streamline refinance program. The property must have been an owner occupied residence originally.

The Ugly: FHA’s streamline refinance without an appraisal  program will now NOT ALLOW any costs to be included into the new loan.  Currently they basically allow costs up to originally loan amount to be included into the new loan.

The new maximum loan amount calculation for FHA’s streamline refinance program will be restricted to: Current Balance – UFMIP refund + new UFMIP

The Good: FHA’s new maximum loan amount calculation for FHA’s streamline refinance program without an appraisal is a lot simpler for everyone to understand, therefore eliminating any confusion.

The Ugly: FHA’s streamline refinance with an appraisal program will not allow the borrower to include any discount points to be included in the new loan amount.  Any discount points must be paid out of the borrower’s pocket. (Discount points allow the borrower to buy down their interest rate to a lower rate)

Miscellaneous Guidelines FHA announced last Friday:

FHA’s Streamline refinance program now requires a maximum CLTV of 125%

FHA’s Streamline refinance Program now requires and current mortgage which has had greater than 12 payments made to not have more than a 1 x’s 30 mortgage late within the last 12 months and a 0 x’s 30 mortgage late within the last 3 months.  (Most lenders do not allow any mortgage lates within the last 12)

FHA will now require a new appraisal if the current appraisal is greater than 120 days old.

FHA’s streamline refinance program will now require verification of any assets which are needed to close

Read all of the FHA announcements including the announcements released last Friday September 18, 2009.