In this article, we will cover and discuss rate and term refinance mortgage loans versus other types of refinance options. Cash-Out and Rate And Term Refinance Mortgage Loans require full documentation as well as a new home appraisal. The easiest and fast track refinance loan program is the FHA Streamline Refinances and VA Streamline Refinances.
FHA and VA streamline refinance loan programs are fast-tracked and work as follows:
- No Appraisal Required
- No Income Documentation Required
- No Credit Scores Required
- The only documentation required is timely mortgage payments for the past 12 months
Reason For Rate And Term Refinance Mortgage Loans Versus Streamlines
There are times when a rate and term refinance mortgage loans is required versus FHA Streamlines and/or VA Streamline Refinances. Here are cases where a full rate and term refinance mortgage loans versus streamlines makes sense:
- Refinancing to get non-occupant co-borrower off the mortgage note
- Refinancing FHA into Conventional Loans
- Doing a cash-out refinance mortgage
- Refinancing an adjustable-rate mortgage to a fixed-rate mortgage
- Refinancing from owner occupant to investment property
- One to four-unit properties
- Full home appraisal required
- If it is just rate and term refinance mortgage loans, no more than $500 cashback at closing can be received by the borrower
- A payoff statement is required
Maximum LTV/CLTV For Rate And Term Refinance Mortgage Loans
The maximum mortgage loan amount is the lesser of the following on FHA loans:
- 97.75% of the appraised value or the acquisition costs as applicable on and/or:
- The sum of the outstanding mortgage loan balance of the first lien up to 2 months of prorating mortgage insurance premium if paying off an FHA Loan, closing costs, prepaid, borrower-paid discount points, purchase money seconds, non-purchase money second liens ONLY IF at least 12 payments have been made
- Prepayment penalties, accrued late charges, escrow shortages, borrower-paid repairs required by the appraisal, minus any refund of UFMIP
- Prepaid expenses are limited to per diem interest and hazard/flood property taxes and mortgage insurance impound
Loan To Value And Refinance
In the event, if the mortgage loan is paid off is not an FHA insured mortgage loan and the borrowers have owned and occupied the property less than one year prior to the mortgage application date, the Loan To Value is based on the lesser of the current appraised value or original acquisition cost. By this, it means the sales price plus any documented costs to repair, renovate, or weatherize the property plus any closing costs including reasonable discount points. Or the total of all mortgage liens held against the property. Use the current home appraised value for all other scenarios
The existing mortgage loan outstanding balance may include up to 60 days of mortgage interest as follows:
- 30 days of mortgage interest for the month that precede the month of closing, and/or
- Up to 30 days of interest for the month of closing
Delinquent Interest
Gustan Cho Associates offers escrow advances to borrowers to make the refinancing happen. Delinquent mortgage interests, late fees, and/or escrow shortages may not be included in the outstanding principal balance of the mortgage loan balance being paid off for the maximum mortgage calculation.
Occupancy Of Former Investment Property Rate And Term Refinance
Here are the following mortgage guidelines that apply when borrowers are re-occupying a property that was formerly used as an investment property but now is going to be used as an owner occupant property:
- If re-occupied as the owner-occupant primary home for 12 or more months prior to the initial application date, the maximum financing is permitted
- If re-occupied for less than 12 months prior to the initial mortgage loan application date, then it is allowed as a rate and term refinance mortgage loans only but the LTV/CLTV is limited to 85% Loan To Value
Secondary Financing
Secondary financing such as second mortgages/HELOC may remain outstanding and subordinated as long as the combined CLTV liens do not surpass 97.75%.
Qualifying For Rate And Term Refinance Mortgage Loans
Mortgage borrowers who need to qualify for any type of refinance mortgages, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are direct lenders licensed in multiple states with no lender overlays on government and conventional loans.
