The FHA streamline refinance enables you to refinance a current FHA loan into another FHA loan with very little verification. Because of the lack of verification required, you are maximized on the amount you can refinance. Without an appraisal, you cannot include the closing costs for the loan, so any money you have to bring to the table, you will have to verify with appropriate bank statements with seasoned funds. That being said, here is the calculation used to determine how much money you can borrow with your FHA streamline refinance.
Start with your Unpaid Principal Balance
The first number you will need is the unpaid principal balance on your current FHA loan. This amount can be found on your latest mortgage statement from your loan servicer or obtained when you order a loan payoff. The unpaid principal balance is strictly the loan balance – it cannot include any late fees, shortages from your escrow account, or late interest fees. This is the base amount to start with in your calculation.
Interest on the Current FHA Loan
You will add to the unpaid principal balance any interest that will be due on your current FHA loan that the new lender will pay off. This interest will be charged according to the intended payoff date. If the payoff is not received by the current lender by the 1st of the month, you will have a month of interest to add to your loan amount. The maximum amount of interest you can add for the current loan is 60 days or two months.
If you are applying for the FHA streamline refinance within 36 months of obtaining the original FHA loan, you will receive an upfront MIP refund from your original loan. This amount gets subtracted from your loan amount as it is a credit towards your new loan. The amount you can receive depends on the length of time that has passed since you obtained the original FHA loan. The refund starts at the 6 month mark as you are required to make 6 payments before you can refinance in the streamline program. At that 6 month mark, you would receive 70% of the upfront MIP that you paid back, putting it towards your new loan amount. As the months pass, the amount goes down 2% each month. By the 36th month, you would receive 10% of the amount you paid back towards your new loan.
The Base Loan Amount
Once you have your base loan amount plus the amount of interest charged on the new loan minus the MIP refund, you have your base loan amount. This new amount still needs upfront MIP added to the new loan, though. So you take this new amount and multiply it by the new upfront MIP factor, which is 1.75%. On a $200,000 loan that would be $3,500. That $3,500 would get added to the base loan amount to arrive at your maximum loan amount for your FHA streamline refinance.
Figuring out your maximum loan amount for the streamline refinance is simple as long as you have a few basic figures. Your new lender can help you figure out your maximum loan amount, but if you want to do it yourself, these basic numbers can help you. Keep in mind that if you do not plan on financing the upfront MIP on the new loan, you will be required to provide adequate asset statements proving that you have the money necessary to pay the charge at the closing. The sooner you refinance your mortgage after obtaining the original loan, the higher the upfront MIP refund you will receive and the less you will have to finance into your new loan.