Part 2 of FHA Week looks at changes to the FHA Refinance options that will be released as part of the major FHA overhaul effective July 14th.

The notable changes include:

Full Qualifying Refinances
Streamline Refinances
Refunds
Summary of Refinance Changes and New Risk-Based Premium Information

Refinance Transactions

The mortgage insurance premium for refinance transactions will depend on several variables. These include whether the refinance is of a FHA-insured mortgage to another FHA-insured mortgage, as under FHA’s streamlined refinance options, is a rate-and-term refinance or is a refinance under the FHASecure initiative. Except for streamlined refinances and mortgage refinancing under the FHASecure initiative, the new LTV and new decision credit score determine the mortgage insurance premiums. Additional information is provided below:

Full Qualifying Refinances (e.g., rate-and-term; FHASecure refinance of a conventional mortgage not presently delinquent; cash-out refinances; any that require complete underwriting). These refinances are subject to the mortgage insurance premiums based on the LTV and decision credit score for the refinance application.

Streamline Refinances . The mortgage insurance premiums charged are subject to whether the existing FHA-insured loan being streamline refinanced was charged premiums based on A) the pre-July 14, 2008 premium structure of 150/50 basis points or B) the post July 14, 2008 LTV/decision credit score premium schedule. The following examples illustrate the appropriate premiums that will be charged for streamline refinances.

• FHA-insured loans pre-July 14, 2008/Borrower paid 150/50 basis points

• Borrowers with an existing FHA-insured loan where the case number for the streamline refinance transaction was assigned before July 14, 2008, will be charged 150 basis points upfront and 50 basis points annually. On subsequent streamline refinances where the case number is assigned on or after July 14, 2008 borrowers will be charged 100 basis points upfront and 50 basis points annually.

• Borrowers with an existing FHA-insured mortgage where the case number for the streamline refinance transaction was assigned on or after July 14, 2008, will be charged 100 basis points upfront and 50 basis points annually. On subsequent streamline refinances borrowers will be charged 100 basis points upfront and 50 basis points annually.

• FHA-insured loans On or After July 14, 2008/Borrower paid Risk-based Premium

• Borrowers with an existing FHA-insured mortgage (purchase or full qualifying refinance transaction) where the case number for that existing mortgage was assigned on or after July 14, 2008, will be charged premiums on the subsequent streamline refinance transaction using the decision credit score and LTV for the existing mortgage being refinanced.

• If the streamline refinance transaction is “credit qualifying” (with or without an appraisal) premiums are based on the new decision credit score and the LTV from the existing mortgage being refinanced.

Borrowers who refinanced their delinquent non-FHA ARM into an FHASecure mortgage are not eligible to streamline refinance their FHASecure mortgage. The refinance transaction subsequent to the FHASecure mortgage must be a full qualifying refinance.

Refund of Upfront Premiums . Refunds of upfront premiums are available to borrowers refinancing to another FHA-insured mortgage within a three-year time period, as shown below.

Summary of Refinance Changes and New Risk-Based Premium Information

FHA mortgages have rapidly become one of the best ways to finance a condo purchase. Due to the fact that FHA loans are not available to all brokers and bankers, many people have heard that you cannot obtain FHA loans easily on condominiums.

In today's market, condo buyers may actually find condominium approvals easier on FHA than on conforming, or conventional, loans. In some instances, there is no additional paperwork to secure an FHA loan on a condo and you can still put little to no money down.

If you are buying in an FHA-approved condo building, there is zero work for you to do. The easiest way to check this is via the HUD FHA-approved condo list here: https://entp.hud.gov/idapp/html/condlook.cfm

If a condominium is not on that list, it is possible to obtain an FHA Spot Condominium Approval. The purpose of the FHA Checklist is fairly straightforward. It essentially serves to:

1. Confirm that the unit owner may sell at their discretion
2. Confirm that the condo association is of financial health and has no current environmental or legal liability, no pending special assessments, and has sufficient financial reserves to operate.
3. Confirm that the property values are free of undue stress such as a single-owner possessing a number of units, that there is sufficient owner-occupany, and that there is adequate maintenance to the common areas.

For the most part, the only properties that are excluded are those where there is a looming financial risk to the buyer. Many homebuyers will find that the FHA Spot Condominum Approval will approve condo associations that also passed the review of a qualified Realtor or real estate attorney.

In today's market, where condominiums may require 10% for many homebuyers on conventional loans, the FHA Spot Condominium Approval offers 0-3% down scenarios and the Seller can pay for costs, transfer fees, and rate reductions in most circumstances.

Seller Pre-approval: FHA loans can help homes sell faster.

In the first few posts during FHA Week, we've talked about the major changes to the program and busted the myth about condo financing on FHA loans.

Today, we'll talk about a successful strategy used by agents who are earning higher sales prices and shorter market times for their clients:

Pre-Approving the Home Sale

Most homebuyers understand the importance of obtaining a pre-approval to aid in negotiations. Savvy buyers obtain pre-approvals or even conditional commitments prior to making their offer to help prevent a counteroffer.

In very much the same way, savvy sellers can use FHA financing to increase the number of potential buyers and thus reduce the need for the dreaded price reduction.

Down Payment Requirements If appropriately structured, many homebuyers can find that they will be eligible for 100% financing through neighborhood assistance programs. Many of today's pre-approved homebuyers need 100% or near 100% financing.

Minimum Credit Score Requirements: FHA loans still allow for people with damaged credit when the risk factors still favor lending to them now. Many of today's homebuyers are only pre-approved for an FHA purchase.

Seller Contributions: More effective than a price reduction, a seller contribution to closing costs will make your home more affordable to a buyer. A seller may credit costs which can allow buyers with less cash to close and a seller may also contibute to rate discounts that allow someone to buy a slightly more expensive home (yours!) at the same payment.

How to Pre-Approve Your Home for FHA Financing

Step 1: Contact us. With a little information about your home, we can issue a decision that indicates whether it may qualify for FHA financing for prospective buyers.

Step 2: Have your Realtor market this information. Many Realtors with FHA-approved buyers are now searching for that "FHA" tag in the MLS. Updating the comments to reference closing cost credits can help. Are you selling by owner? Contact us for a quick cheat sheet on tips we've seen Realtors use with success.

1. Credit-driven fees or premiums charged to lower credit scores
2. Options for Refinances
3. FHA for Condominium Purchases
4. Pre-arranging FHA financing as a tool for Sellers