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Understanding the UFMIP Refinancing

by Dave
(Golden, CO )

I closed on a FHA loan in 12-14 I had to pay about 3200 in upfront mortgage insurance.

It is now my understanding that I can re-fi that to lower my monthly mortgage insurance payment.

I am trying to understand the process.

Do lenders use the UFMIP refund money to cover their costs? and allow me to lower my monthly mortgage insurance payment and possible lower interest rate with pretty much no closing costs on my end?

It seems like some will do that and others will want CC money as well.

It seems like a shell game and I want to understand.



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What Happens to UFMIP on FHA Refinance
by: Jeffrey

Hello Dave,

Thanks for coming by my website and asking your questions. Very good questions I might add.

If I understand this right, you purchased a home in December of 2014 and paid $3200 in UFMIP (Up Front Mortgage Insurance Premium).

If you recall, this money was most likely added onto your loan amount. So you actually financed it into the loan when you closed.

Now if you have good equity in the home and can save money on a monthly basis, it could make sense to do a refinance.

However, I would only suggest this if you can save about 5% or more on your monthly payment. So if your payment right now is $1000 a month and your new payment would be say, $950 a month it might make sense to do this.

Providing you have made on time payments over the last 6 months and if you are going save 5% or month per month, look into the "FHA Streamline Refinance".

The mortgage cannot be more than 36 months since you closed. You will get a refund from the government of the UFMIP for the "unused portion".

I'm not exactly sure how this gets calculated, but it decreases by 2 percentage point each year until no money remains to be refunded. So since it appears you have only had your mortgage for about 1 year, and if you qualify for the FHA Streamline Refinance, this could be the lowest cost way to get it done. This program does not allow for any cash out. It is what's called a rate and term.

The FHA Streamline Refinance is among the simplest refinance programs available today.

According to the FHA guidelines, the FHA Streamline Refinance requires:

No home appraisal
No credit score check
No income verification

The homeowner must receive a "Net Tangible Benefit" - in this case, defined as lowering the principal + interest on its mortgage payment by five percent or more.

If your mortgage is more than six months old, you may find yourself eligible.

You may also be eligible to drop your FHA mortgage insurance premiums (MIP) via a refinance into a conventional loan.

With home values rising nationwide, many FHA-backed homeowners now have sufficient equity to leave the FHA and refinance into a loan with Fannie Mae or Freddie Mac. Mortgage rates are slightly higher but there's no FHA MIP to pay.

I hope this helps. Click Here to Learn More on FHA Streamline Refinance.



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