“No Appraisal” Mortgages Make 2012 Refi Boom
There are four common mortgage refinance programs for which home appraisals are not required. The two most used program are the FHA Streamline Refinance and the Home Affordable Refinance Program, which is more commonly called HARP.
There is also the VA Interest Rate Reduction Refinance Loan (IRRRL) and the USDA Streamline Refinance.
Because these four programs eschew home appraisals as part of the refinance process, they can be used by homeowners whose homes have lost value since the date of purchase and, with mortgage rates at all-time lows, demand for such loans has soared this year.
The monthly savings are big, too. Homeowners refinancing via HARP are lowering their payments by 34%, on average, and many are doing it with low- and no-closing cost mortgages.
Mortgages rates have been below 4% for more than a year. There are huge potential savings in a refinance to today’s rates.
Comparing FHA Streamline Refinance And HARP 2.0
Of the four appraisal-less refinance program, the FHA Streamline Refinance and Home Affordable Refinance Program remain the most common.
The two programs are similar in many ways, but key differences remain.
Loan Endorsement Entity
The FHA Streamline Refinance is for FHA-insured mortgages only. There are no exceptions to this policy.
The HARP program is for Fannie Mae- or Freddie Mac-backed mortgages only. There are no exceptions to this policy.
Qualification / Eligibility Dates
The FHA Streamline Refinance program requires that FHA-insured homeowners make at least 6 mortgage payments on their current FHA mortgage before they’re eligible to refinance into a new FHA mortgage.
The HARP program requires that refinanced mortgages have a securitization date of no later than May 31, 2009. Your loan must be 42 months old to be eligible.
Mortgage Application Verifications
The FHA Streamline Refinance program does not require verification of income, employment, or credit score, per official FHA program guidelines. Lenders sometimes verify one or all of these items.
The HARP program does not require verification of income, employment, or credit score, per official program guidelines. Lenders sometimes verify one or all of these items.
Mortgage Payment History
The FHA Streamline Refinance program allows 1 mortgage late in the last 12 months, but none within the last 3 months in order to be FHA-eligible.
The HARP program allows 1 mortgage late in the last 12 months, but none within the last 6 months in order to be HARP-eligible.
The FHA Streamline Refinance does not allow closing costs to be added to the loan balance. They must be paid as cash at closing, or paid by the mortgage lender on the homeowner’s behalf.
The HARP program allows closing costs to be added to the loan balance, paid as cash at closing, or paid by the mortgage lender on the homeowner’s behalf.
The FHA Streamline Refinance allows for unlimited loan-to-value on all mortgages.
The HARP program allows for unlimited loan-to-value for fixed-rate refinances. ARMs cap at 105% loan-to-value.
Mortgage Insurance Requirements
The FHA Streamline Refinance has a two-tiered mortgage insurance premium (MIP) system. For 30-year fixed rate mortgages, MIP rates are as low as 0.55% annually, and as high as 1.50%. Tiers are different for 15-year mortgages.
The HARP program does not require new mortgage insurance coverage, regardless of LTV. Existing mortgage insurance, however, must be replaced using the same “coverage level”.
Maximum Loan Size
The FHA Streamline Refinance allows for loan sizes up to $729,750
The HARP program allows for loan sizes up to $625,500
The FHA Streamline Refinance is for rate-and-term refinances only. Cash-out mortgages are not allowed. The FHA will not allow you to shorten your loan term unless your mortgage payment drops 5% or more.
The HARP mortgage program is for rate-and-term refinance only. Cash-out mortgages are not allowed. The program encourages homeowners to shorten loan terms to 20- and 15-year fixed rate mortgages, offering more lenient approvals.
Home Appraisals And Valuations
The FHA Streamline Refinance assigns the home’s purchase price as the its appraised value, irrespective of the home’s fair market value. No appraisal is needed.
The HARP program may require an appraisal, but the value is ignored. Values are assigned via an Automated Valuation Model (AVM).
Click here for today’s mortgage rates.
Get HARP, FHA Streamline Refinance Mortgage Rates
If you’ve been waiting for low mortgage rates to refinance, it’s time to get started. The national economy is improving and the forces that pushed rates down are beginning to subside. 2013 may be a rough year for rates.
About the Author
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan at or click to get a free, no-obligation rate quote.
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