Financing in 94086>Question Details

Jetjohn, Home Owner in Cobb County, GA

I have bofA FHA loan. Payed Mip for 6 yrs. Can I pay down mortgage to 20%equity then streamline refi with no appraisal?

Asked by Jetjohn, Cobb County, GA Tue Jan 17, 2012

Home would not appraise well for conventional refinance. I'm at 88% loan balance based on initial purchase price. Trying to remove M.I.P. and streamlline refi with no appraisal.

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Gregorio Denny’s answer
"Jetjohn, I have difficulty understanding how you would pay down to 20% equity without an appraisal."

Deborah, FHA mortgage insurance comes off based on the original purchase price or appraised value, not current value. If he paid down to 78% (not 80) he could have it removed without the need for an appraisal. The problem as has already been stated is that if he does a streamline after, it will reset the mortgage insurance for at least another 5 years.

If you are able to pay down to 78% you should at least do that and get rid of the insurance.
Web Reference: http://WeFixRates.Com
1 vote Thank Flag Link Wed Jan 18, 2012
"SO I guess I did not read the question correctly. My appoligies. Let me restate my answer, Yes you can pay down the mortgage to 20% and the MI would drop off, "

Sorry Richard, but that's still not correct. FHA mortgage insurance comes off at 78%, not 80%.
While you may think I am being overly harsh and petty, I 'm not. I just believe that accurate information is paramount to people looking for advice about their largest asset.
0 votes Thank Flag Link Sat Jan 21, 2012
"Once the balance is at 78% of the purchase price the MI falls off. You have owned it for >5 years so yes."

The answer is NO! Let me remind you of the question:
"Trying to remove M.I.P. and streamlline refi with no appraisal."

If he does a streamline refinance, MI will go back on for at least 5 years unless he opts for a 15 year term.
The possible solution if he can afford the payments is to do a 15 year, but a 30 year will still have the mortgage insurance.
Web Reference: http://WeFixRates.Com
0 votes Thank Flag Link Thu Jan 19, 2012
Michael this is exactly why agents should not answer. Let me break it down for you:

You state:
"Jetjohn never claimed that FHA was his goal. "

Yes he did:
"I have bofA FHA loan."
"Trying to remove M.I.P. and streamlline refi with no appraisal."

The only way to do that is with another FHA loan

The OP also states:
"home would not appraise well for conventional refinance."

Since he is in an FHA mortgage now, we know it's not owned by Fannie or Freddie so there are no options conventionally. He is trying to remove mortgage insurance if you recall his goal.

"Is there a rule that states he "must" choose an FHA option?. I do not believe that is required in the scenario. I am not a lender so, maybe I don't get it."

You are right; you don't get it.
0 votes Thank Flag Link Thu Jan 19, 2012
Jetjohn never claimed that FHA was his goal.

Is there a rule that states he "must" choose an FHA option?. I do not believe that is required in the scenario. I am not a lender so, maybe I don't get it.

Jetjohn, You can clearly determine the differences to consider before you choose a loan agent from the delivery alone. wow.
0 votes Thank Flag Link Wed Jan 18, 2012
Jetjohn, I have difficulty understanding how you would pay down to 20% equity without an appraisal. No lender is going to assume 20% equity based upon the purchase price of six years ago. I have to agree that a traditional refinance, bringing cash to close is your best option.

@Rudy, Half truth. FHA requires MIP for a minimum of five years IF the equity of 22% is reached. NO lender is going to drop MIP solely based upon a time frame. I am quite sure a lot of home owners who bought five years ago wish that were the case.
0 votes Thank Flag Link Wed Jan 18, 2012
Hi, Jetjohn, since you purchased your home before July 1999, you should be eligible for a Streamline w/o an appraisal. Furthermore, so long as you have not refinanced since purchasing the home, your MIP should have fell off after 5 years. If this is the issue, contact your current lender and request that it be removed.
0 votes Thank Flag Link Wed Jan 18, 2012
Let me know if you want me to run comparables for you. This will give you an approximate amount you need to pay down the loan to get you to/below 80% loan-to-value. Seeing how do-able that is will help you decide what your next step should be.
0 votes Thank Flag Link Tue Jan 17, 2012
Jetjohn,

The best course of action would be to just refinance the property, looking to pay the balance down to 80% or less to eliminate the MI.

You will want a good realtor to run comparables for you first. Get this to your lender and he/she will be able to run numbers for you to give you a pretty close dollar amount needed to get you to that 80%. Then you can decide on whether to do it or not.

The answers below are correct, you can't streamline FHA without taking on a new FHA loan and re-starting that 5 year clock all over. The only thing you save with a Streamline is the cost of the appraisal and losing that MI is easily worth going conventional for.

Again - before you pay anything down at all, get those comparables done and have your loan officer calculate the cost to you to ensure you are getting the benefit you are looking for.

Best regards and best of luck,
0 votes Thank Flag Link Tue Jan 17, 2012
Hi Jetjohn,
As John Burke rightly says, an FHA refi of any kind is a new FHA loan, which always restarts the MI clock for 5 years, though you may get some of your original up front MI premium back. If you have paid MI for 5 years AND your loan to value (LTV) based on the lesser of the original sales price or appraisal reaches 78% then you can request removal of the MI thru your loan servicer (BofA for you). You can reach 78% by paying extra principal. I think this is your best option.

But feel free to contact me - I'm in Sunnvyale! tony@svmortgageguy.com
0 votes Thank Flag Link Tue Jan 17, 2012
Hi JetJohn, Your strategy to refi is a great one. However, to refinance a home the lender will need to appraise it for value. If the appraised value does not exceed 88% your going to be disappointed.

The only option you have is to contact your current lender and inquire if they have a program that meets your goal. I would expect for them to request an appraisal, in any case.

Michael
http://LosGatosHomesandRealEstateBlog.com
0 votes Thank Flag Link Tue Jan 17, 2012
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