FHA Refinance Loan Programs

A Complete Guide to FHA Refinance Loan Options Thank You for Attending Class will begin at 7:00pm Presented By: Broadview Mortgage Corporation Presenter: Scott Schang Contact Information: Phone: 866-667-6724 [email_address]

A Complete Guide to FHA Refinance Loan Options

The Purpose and Goals of this Class

To Educate and Empower Home Owners

To tell you the things that lenders/brokers don’t usually like you to know about

Educate you about the FHA refinance options available to you in today’s market

Empower you with the ability to make educated decisions about your refinance options

Topics We Will Cover In This Class

The Importance of doing a Cost/Benefit Analysis when considering a refinance

FHA Refinance Options

Rate and Term Refinance

Cash Out Refinance

Streamline Refinance

Wrap Up and Take Aways

Ask Questions throughout presentation

You may type questions in at any time during the presentation – Questions box on your screen

Home loan specialists are standing by to answer your questions during the presentation

The only dumb question is the one you don’t ask

Write number down now in case you get disconnected

1-866-667-6724

Empowering you to make educated decisions about your refinance

Refinancing your home is a serious financial decision that requires careful consideration

The information you will receive here today will help you to see through common advertising and marketing tactics and enable you to make sound financial decisions about your family’s greatest investment….Your home.

Establishing your motivation

3 motivations for refinancing

Reduce monthly payment - Save money

Reduce term of loan - Pay off earlier

Cash out – Pay off bills / Home Improvement

Common misperceptions about refinancing

Reducing monthly payments will save you money

You must reduce the term to pay loan off early

Many lenders may not tell you this part…..

Performing a Cost / Benefit analysis

Reducing your monthly payment

There is always a cost to refinancing

“ Resetting” your term may lower your payments but cost you thousands

“ Red Flag” if a lender does not explore your motivation or discuss cost / benefit analysis

Cost Benefit Analysis Example

Bought 2 years ago for $200,000

$195,200 Loan Amount currently

6.25% Interest Rate

$1,231.43 payment – Principle and Interest only

First, let’s take a look at the “Benefit”

New Interest Rate – 5.25%

New Payment - $1,115.45 – Over $115 a month!

That’s a Savings of over $41,400 over the term of the loan! (30 year fixed)

Sounds not too bad right? Maybe, maybe not

Next, let’s look at the estimated “Cost”

New Loan Amount - $202,000

Origination/Discount 1% - $2,020

Processing/Underwriting - $795

Lender / Broker fees - $995

Title / Escrow / Notary - $1,100

Interim Interest 15 days - $435

Escrow Account – Depends on time of year

Taxes – 7 months - $1,500

Insurance – 2 months - $85

Actual costs may vary – This is realistic

And finally, the Analysis

Old Loan amount of $195,200

$1,231.43 paid for remaining 336 months

Total pay off - $413,760.48

New Loan amount of $202,000

$1,115.45 paid over 360 months

Total pay off – 401,562.00

Actual life of loan Savings is $12,198.48

$33.89 actual monthly savings

Paying off home sooner – Reduce term

There is always a cost to refinancing

“ Red Flag” if a lender does not explore your motivation or discuss cost / benefit analysis

Cost Benefit Analysis Example

Bought 2 years ago for $200,000

Have 30 year fixed now

$195,200 Loan Amount currently

6.25% Interest Rate

$1,231.43 payment – Principle and Interest only

First, let’s take a look at the “Benefit”

New Interest Rate – 5.00%

New Payment - $1,597.40

Only $365.97 increase

Pay off home in half the time!

Sounds not too bad right? Maybe, maybe not

Next, let’s look at the estimated “Cost”

New Loan Amount - $202,000

Origination/Discount 1% - $2,020

Processing/Underwriting - $795

Lender / Broker fees - $995

Title / Escrow / Notary - $1,100

Interim Interest 15 days - $435

Escrow Account – Depends on time of year

Taxes – 7 months - $1,500

Insurance – 2 months - $85

Reducing the term does not reduce costs

And finally, the Analysis

New Loan amount of $202,000

$1,597.40 paid over 180 months

Total pay off – $287,532

Old Loan amount of $195,200

Total pay off - $413,760.48

Interest Savings of - $126,228.48!

OR…..Increase payment to $1,597.40

Pay $7,000 cost toward loan - $188,200

Pays off home in 183 months

Now you can make an educated decision!

FHA Refinance Loan Basics

2009 FHA Loan Limits

Based on MSA – from $362,790 to $625,500

“ FHA Jumbo” is anything above $417,000

Results in slightly higher interest rates

Owner occupied only - 1-4 units ok

Loan limits increased for 2,3,4 units

Limits determined by MSA – Call for details

All FHA loans require full documentation meaning W2’s and/or Tax Returns

FHA Loans require 2 types of Mortgage Insurance Premiums - MIP

Upfront Mortgage Insurance Premium

1.75% of Loan Amount

Can be financed into loan amount

Monthly Mortgage Insurance Premium

.55% of Loan Amount

Included in monthly payment

Included on mortgage statement

MIP required for minimum 5 years

LTV must be 78% or less to remove

Calculating your MIP Payment - Example

$200,000 Loan amount x .55% = $1,100

Divided by 12 = $91.67 MIP

30 day Mortgage lates in the past are ok with compensating factors

High credit scores

Months of reserves

Low debt to income ratio

Detailed letter of explanation

Must be current for month of refinance

FHA Refinance Loan Programs

Can include closing costs in loan only

Cash Out Refinance

Can include closing costs and get cash out

FHA Streamline Refinance – FHA to FHA

*”No fees” included in loan - no appraisal

Fees included in loan - appraisal required

FHA Refinance Loan Options

Credit Score Requirements

580 Minimum Credit Score as a guideline

Can go lower on exception basis

620 Minimum Credit Score – “FHA Jumbo”

Loan amount over $417,000

Maximum Loan to Value 97% LTV

Before upfront Mortgage Insurance Premium

FHA to FHA use Streamline Program

Cash Out Refinance

Credit Score Requirements

580 Minimum Credit Score as a guideline

Can go lower on exception basis

620 Minimum Credit Score – “FHA Jumbo”

Cash Out Refinance

Maximum Loan to Value 95%

Up to loan amount of $417,000

Must have owned 12+ months

1-2 unit properties only

No more than 1 x 30 late in 12 months

Current now

Maximum Loan to Value 85%

Owned home less than 12 months

FHA Streamline

Can only be used for Rate & Term and must benefit the borrower with rate reduction

Can only be used if existing loan is FHA refinancing into FHA loan

No income or asset documentation required

Two Streamline Options Available

No fees included in loan - No appraisal

Fees paid through loan - Appraisal required

FHA Streamline – Fees not included

Refinanced loan amount can not exceed current principle balance

You will bring in money to escrow for impounds and interim interest

Next month’s payment should cover

Lender can provide “credit” to cover escrow and title insurance policy

No appraisal required

No limit on subordinate financing as long as loan remains in 2 nd lien position

FHA Streamline – Fees Included

Refinanced loan amount can include closing costs including title, escrow, impounds, interim interest and lender fees

Lender can provide “credit” to assist with closing costs

Appraisal required

No limit on subordinate financing as long as loan to value does not exceed 97%

Only use an FHA Approved lender!

Many illegal “Branch” companies that are not approved to originate FHA loans

Check official HUD website for approval status of lender - will provide link on site

http://www.hud.gov/ll/code/llslcrit.cfm

“ Red Flags” include – a different company name and/or address on page 3 of loan application.

Wrap up and Take Aways

We are a direct Lender that specializes in FHA Refinance, Streamline and Purchase loans.

We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA, VA, Conventional and Jumbo Loans

We are more than happy to be your “second opinion” if you are already working with someone

We are committed to educating and empowering homeowners - Join us for future classes

Wrap up and Take Aways

You will receive a “Thank you” email with links to the information we’ve talked about here today

Copy of power point presentation

Link to search HUD approved lenders

“ What’s my home worth?” – Value analysis

Secure on-line loan application

Simple, online form for requesting a no-cost, no obligation Cost/Benefit analysis on your loan

Have your latest mortgage statement handy

Upcoming Home Buyer Classes

A Complete Guide to Buying Foreclosures and Short Sales

Real Estate Agent Round Table

Open Q&A with Experienced Buyer’s Agents talk about buying home in this market

A Complete Guide to FHA Purchase Loans

A First Time Home buyer’s Complete Guide to Closing Costs and the Good Faith Estimate

Check back often for upcoming classes

Thank you for Attending Please Join us for one of our other educational home buyer classes Presented By: Broadview Mortgage Corp. Presenter: Scott Schang Contact Information: Phone: 866-667-6724 [email_address]