Ocean Mortgage 2020 Newsletter 010

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Trump vs Biden
(Actually No, Let’s Talk FHA Refinancing)

“Seriously? I don’t need an appraisal or to show my tax returns to refinance my mortgage?”

Getting a conventional mortgage is usually more advantageous than an FHA mortgage. This is mainly because there is either no monthly private mortgage insurance (PMI) requirement at all (provided the loan amount is ≤80% of property value), or PMI can be eliminated when the 20% equity level has been reached. Also, because FHA loans are insured by the U.S. Federal Housing Administration, FHA borrowers are required to pay an upfront mortgage insurance premium of 1.75% of the loan amount – the cost of which defrays costs/losses under this program.

But there are some clear benefits to obtaining an FHA Loan vs a Conventional Loan.

FHA Allows:

  • Lower credit scores (<640)
  • Down payments of 3.5% (or less, if a government grant assistance program is available)

  • Lower monthly borrower earnings (i.e., higher debt-to-income ratios are often accepted)

Best of all, it is easier to refinance an FHA loan to lower the monthly mortgage payment.


  • No appraisal requirement

  • No need to provide tax returns or paystubs

  • No reserve requirements (no need to demonstrate liquidity for future mortgage payments)

Key Streamline Rules:

  1. The existing loan must be current

  2. There must be a “net tangible benefit” (e.g., an interest rate reduction of at least 0.50%)

  3. When refinancing your loan, the existing balance cannot be increased by over $500 (however, borrowers can elect to pay a higher interest rate in exchange for a “credit” from the lender that could cover some or all of the closing costs)

Here’s the Point:  Compared to refinancing a Conventional loan, FHA makes it very easy for borrowers to refinance their FHA mortgage with fewer credit document requirements.

Mike Kanuka, Founder & President

NMLS #901949 (Company)
NMLS #880882 (Individual)

Equal Housing Opportunity