FHA 203k Rehab Loan and HARP Streamline Refinance
by Jennifer in Chesterfield, MI and by Dani in Warwick, NY
Refinancing with FHA 203k rehab loan and HARP streamline: Jennifer's remodel turned into a bigger project than originally anticipated. Is the FHA 203k rehab loan her solution to refinancing a house that is mid-renovation? Dani has been offered two refinance scenarios, lower mortgage rate vs lower closing costs for the HARP streamline program which technically does not exist.
Ask Kate: FHA 203k Rehab Loan Program By Jennifer in Chesterfield, MI
My husband and I purchased a home 2 years ago and have been renovating it slowly but surely ever since.
We recently tore out the half bath on the main level to remodel it and found space behind it where we could relocate our basement stairs to have a three level constant flow from the upstairs all the way into the basement, rather than the broken up access from the garage entry that it currently is now.
That project got put on hold because of the time it is going to take to relocate plumbing, electrical, HVAC, etc. in the basement to move the stairs.
We want to refinance in the middle of this and are looking for a mortgage company who will refinance us and be able to either look past the work or not require an appraisal. Probably our first choice would be a company that would look past the renovation work. We feel there is more equity in it than when we purchased due to the improvements.
Are there such companies and are the fees that they would charge worth it to do this?
Kate's Answer: FHA 203k Rehab Loan Program
Oh-oh. This could be a problem.
Banks favor home improvements that increase equity but don't want any signs of renovation until the loan process is complete.
But you aren't alone in starting a remodel that mushrooms into an even bigger project. Another common mistake is for enthusiastic homeowners to begin tearing out flooring before the appraiser arrives. Other overly-optimistic homeowners fail to research the cost of remodeling and run out of money before finishing.
But the disappointing results are the same. Banks generally refuse to secure a loan with a house that is under renovation
yet homeowners need money to complete the remodel.
Renovating with FHA 203k Rehab Loan
So, short of swallowing your pride and asking a relative for a short-term loan, you might find a solution in the FHA 203k rehab loan.
Many people are aware that this all-in-one construction loan is suited for home buyers who purchase fixer upper houses. But they don't know that homeowners can use it to remodel their current homes. Get more details on this unique refinance program at The FHA Rehab Loan for Fixer Upper Houses
Experienced Lender - Experienced Mortgage Originator
But the program is not without its sticking points. So research your area for the lender and loan originator with the most experience in the FHA 203k rehab loan program. They should be able to tell you if your situation fits lending guidelines.
They should also be equipped to hold your hand through the process to a successful close. Here's more... How to Find FHA Lenders - Insist on Proven Track Histories
Ask Kate: Streamline HARP vs Regular HARP Refinance By Dani in Warwick, NY
I have a choice to make between a Streamline HARP and a regular HARP.
Can you give me some advice?
My current rate is 5.9 percent and have about 21 more years left on my 1-year mortgage. For a 30 year loan, I was offered a HARP Streamline rate of 4.75 percent with NO closing costs - I'd save about $420 a month.
With the regular HARP refi program, the rate is 4.25 percent with $6500 in closing costs plus appraisal. - I'd save about $500 a month.
My thinking is that the difference between 4.25 and 4.75 is really not that much, and not worth spending $6500 in order to get the lower of the two. On the other hand, I would break even in about 7 years, and THEN I'd see some savings after that.
Not sure if I want to wait that long? I don't even want another 30 year mortgage (who does!).
Either way, if I go for another 30 year loan, then I plan to make additional payments to principal to be done a little sooner.
Any suggestions on which direction I should go? The Streamlined HARP or the regular HARP? Thanks!
Kate's Answer: Streamline HARP vs Regular HARP Refinance
Technically, there isn't an official HARP streamline program. But your lender may be using the term to describe a Freddie Mac loan that is being refinanced into a Freddie Mac HARP loan. Or a HARP no-income verifier loan. Or a HARP refinance without an appraisal.
Either way, since you are most interested in comparing mortgage rates and closing costs, let's proceed.
Because it is quite common for mortgages to be refinanced every seven years, I'm inclined to agree with your preference for the higher interest rate, lower closing costs, and equity preservation.
But if the monthly payment at 4.75 percent is not affordable, taking the lower interest rate and higher closing costs might be your best option.
HARP No Income Verifier Guidelines
Unless of course (this is like flipping a pancake), your loan approval depends on HARP no-income verifier guidelines.
To read more about this, go to HARP No-Income Verifier Program
and HARP 2 Embraces No Income Verifier Guidelines
Faster Mortgage Pay Off
Have you seen my mortgage calculator with three short tutorials to help homeowners calculate faster payback periods for their mortgages? It's at Home Mortgage Payment Calculator Tutorials: Learn to Calculate Early Pay-Off
Lastly, I wrote a book on beating the bank at their own game using amortization. It's a step by step how-to formula for an accelerated payoff of consumer and mortgage debt without giving up your lifestyle. You can read about it at The Mortgage Freedom Project
Because, as you say, who wants to take 30 years to pay off a mortgage!
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