FHA Refinance Question

Asked by David, Chicago, IL Thu Feb 19, 2009

I am currently at 6.125 on a conventional 30 year fixed. We did lender paid mortgage insurance so we have a straight 95% loan. We closed on our condo in May, 2008 and couldn't get a second to do an 80/15/5. Do I have any opportunities to reduce my rate and ultimately my payment? Could I do an FHA refi loan? If so, what are the additional costs asociated with an FHA loan. We have thought about paying down the loan to 90% LTV, but in this economy it is nice having that cash around in case one of us were to lose our income. Are we stuck with our 6.125% rate (it's not terrible, I just would rather have 5.25 or 5.375)? Obviously this would depend on the place appraising out which I hear is hard these days.

Thanks in advance for any help.

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Jaysen Kenney, , Anaheim, CA
Sun Feb 20, 2011
well, with FHA you may have little or no closing costs vs a conventional.
How long will you be in the home?
There's quite a few side-by-side comparisons for FHA and Conventional loans.
6.125% is pretty good. to effectively pay it down, see if you can pay in bi-weekly payment and the lender apply it right away to reduce the nominal interest.
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Jerry B. San…, , Atlanta, GA
Wed Mar 3, 2010

More than a year after your initial request. At this point I would doubt you would benefit by doing a refi to FHA. On a 30 year FHA loan you have Up Front Mortgage Insurance and monthly Mortgage Insurance payments as well. That with the FHA closing cost it would not be beneficial to refinance. Look at how long it would take to recoup the cost. Of course in today's environment there are problems with properties appraising low, you may not qualify or have to pay your current mortgage down.

PS' some said do a streamline FHA. Can't be done!. FHA to FHA only..
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, ,
Sat Mar 7, 2009
David, you should consult with your mortgage professional and ask about a streamline FHA refinance; this is refinancing an existing FHA mortgage with a new FHA mortgage. There is the option of completing this streamline FHA refinance with or without a current appraisal. This, of course, has pros and cons. From your description, it seems you would qualify and perhaps benefit from improved mortgage rates and money savings.
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Marty S, , Irvine, CA
Wed Feb 25, 2009
FHA is always an option. Sit down with a mortgage broker and discuss your options.

I am a mortgage broker. If I can be of service, please let me know!

Martin Smith

Precision Funding
877-238-6324 Ext 704
877-238-6324 FAX
0 votes
Ria, Home Buyer, Chicago, IL
Wed Feb 25, 2009
Quick thought. We have a home not a condo and had an FHA mortgage we closed on also in May 2008, because we are FHA we are in the process of a refi to 5% and need no apprasial since it's FHA and we had one when we purchased.
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Christopher…, Agent, Chicago, IL
Thu Feb 19, 2009
Dear David,

I just spoke with a lender that our office has been working with. And there are a few questions and comments that I can offer you. Assuming that your property appraises out you could do an FHA loan as long as the property has at least 5% equity in, so you would not be forced to pay down the loan to 90% unless you wanted to. To get an FHA loan, your condo association must have been turned over to the owners of the units for at least one year, and the building would need to be FHA approved. If the building is not yet FHA approved, then you might be able to get a "spot" approval to do the loan. You can check to see if your building is on the FHA's list of approved properties at http://www.hud.gov. You can contact Ed Rodriguez with Bank of America at 773-316-0132 (cell) or 630-941-6983 (off) or at ed.rodriguez@bankofamerica.com. Good luck to you.

Christopher Thomas
Broker Associate, Sudler Sotheby's International Realty
773-418-0640 (cell)
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JonTheBanker, , Chicago, IL
Thu Feb 19, 2009
Hi David,

The short answer would be probably not - but it depends. I'm in the same boat except underwater so I have no opportunity to refinance my condominium. If it were me, the first step (and most important) is to run the math on refinancing assuming FHA financing @ 95% and all other loan criteria being superior (credit, debt ratios, assets etc). If the after tax savings is positive after the cost of the loan, then the refinance if beneficial. Step 2, I would have a CMA completed to determine current market value. if you were then still at 95% LTV or better based on solid comps within the CMA, there may be an option to refinance. FHA would only be viable if the condo project is already on the approved list of developements with FHA or if the building could meet spot-loan specifications. Step 3, check the language within the bylaws of the association documents. If there is anything stating that the "association retains first right of refusal", the bylaws would have to be ammended and that verbiage would have to come out. That is very unlikely to happen. However, if there is no language indicative of the first right of refusal belonging to the association, the first 3 hurdles have been surpassed. We can then move forward in tackling the rest.

I would be obliged to do all the math for you on this David but through a private email. Let me know if we can help. We appreciate you as a consumer and customer alike.
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David Cruick…, , Palatine, IL
Thu Feb 19, 2009
I am afraid the apprailsal will be the biggest factor in this scenario. You can do an FHA if it appraises high enough. Costs associated with FHA inlcude upfront mortgage insurance which amounts to 1.75% of the loan amount. This can be tacked onto the end of the loan inseated of coming up with cash at closing. PMI will also be accessed on the loan as in a conventional loan product (0.5% of the loan amount spread over 12 months). The PMI has to be paid for a minimum of 5 years even if the Loan To Value (LTV) drops below 80%.

I would be happy to take a look and try to help you. Your risk if the scenario does not fit would be about $350 for the cost of the appraisal (FHA appraisal). I am dealing with quite a few people in your type of situation so iIdo have a good deal of experience at this. Click on my profile for contact informtaion if you would like speak with me. Good Luck!
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