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“My son has been getting offers in the mail to refinance his home. He has an FHA (Federal Housing Administration) mortgage right now, but only been in it for three months. Plus, he didn’t have the best credit when he bought the house and was fortunate to get the loan that he did. Are these offers legitimate and should I encourage him to call his loan servicing company to get more information or talk to a local lender instead?”

Ever since the FHA lowered their insurance premiums, homeowners with recently insured FHA loans have been getting flooded with solicitations to refinance because it could save them money. Without knowing the details to his file, I can’t really comment or quantify one way or the other as to if he should make a change soon or push it out awhile longer until his credit has improved. Regardless, he probably will have to wait three more months anyway to satisfy a six-month seasoning requirement by the FHA.

Whether he speaks to his loan servicing company or to a local lender, he should obtain guidance on the timing of this refinance only after a mortgage consultant has been able to assess his current credit and financial profiles. For example, there are two main credit tiers for FHA streamline refinances, one with FICO scores between 620-639 and the other with FICO scores of 640 and above.

The ability for your son to transition from one FHA loan to another FHA loan with the least amount of documentation (streamline) is primarily based on having a higher credit score. Not to mention, there are more rewards too. The interest rate can be lower with a better FICO score, which combined with the reduced insurance premium, could provide significant savings until he hopefully becomes eligible for a conventional refinance when he has more equity in the home.

“I’m a Realtor, and my client purchased her home with the help of the California Homebuyer’s Down-Payment Assistance Program a short time ago. I heard that with the recent change in FHA insurance premiums, my client might be immediately eligible for the lower insurance premium. Can she still take advantage of this lower insurance premium without having to give up the down-payment assistance loan she got too?”

First off, you should be commended for staying on top of the changing tides in the mortgage world and for seeking out this information on behalf of your client. I believe you are referring to what’s called a CalHFA junior loan. This means loans such as the extra credit teacher program, zero-interest program, the revitalization area program, the high cost purchase assistance program and of course the home buyer’s down-payment assistance program may be eligible for a special streamlined subordination process.

According to CalHFA, “it will allow homeowners to refinance their first mortgage loans in order to take advantage of low interest rates and recently reduced FHA mortgage insurance premiums, without being forced to pay off their existing CalHFA junior loan(s) or declare a hardship.”

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Chris Salese can be reached at chris@delsurmortgage.com or 707-363-4439. He is a licensed California mortgage banker (NMLS 254469 /1850) and equal housing lender.

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