How to Calculate the Maximum Mortgage for an FHA Streamline Refinance
An FHA streamline refinance is a quick and easy way to refinance your mortgage that requires less in the way of documentation. The only requirements for becoming eligible for a streamline refinance through the FHA are that your existing mortgage must be an FHA mortgage, you cannot be delinquent and the goal of the refinance is to lower your monthly payment. You will not be eligible to get cash out of the refinancing. There are several other restrictions; however the most important is the maximum amount the new mortgage can represent.
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Instructions
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Determine whether or not an appraisal of your home's current value is required. During the refinancing process, the lender may require the home to be reappraised to determine the amount for which the new mortgage may be eligible. The final mortgage amount will be determined by the the house's appraised value, the equity you have built up in the house and the balance of your outstanding mortgage.
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Determine the amount of cash that you have available for closing costs. If you decide to pay closing costs out of pocket, the rate you receive on the refinanced loan will be less than if the closing costs are taken from your equity in the home and are rolled into the loan. The closing costs can only be rolled into the loan if there is enough equity in the home so that the existing mortgage and closing costs do not exceed 97 percent of the newly appraised value of your home.
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Check the loan limits in your geographic area. Loan limits for streamline finances vary based on your particular area of residence and follow FHA mortgage limits, which will only allow a borrower to finance 97 percent of the home's appraised value. You can find these limits on the HUD website (see Resources)
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Calculate your maximum mortgage amount. For example, if the newly appraised value of your home is $150,000, the maximum amount of your new mortgage is $145,500. This amount represents 97 percent of the home's value.
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Tips & Warnings
You can refinance your home mortgage through this program without an appraisal as long as the new mortgage loan amount does not exceed the original mortgage loan amount. While residential homes can be refinanced with or without an appraisal, investment properties will only be refinanced without an appraisal.
