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We are planning on moving to florida in May or June and currently reside in Ohio. We will be renting the house out and have no problem claiming it as a rental. We don't qualify for traditional refinance because of the Loan to Value (just purchased 2 1/2 years ago so not much equity). Interest rate is 6.375. We are told we might be able to do an FHA Streamline but will anything happen if we move in May? I hear there are penalties, etc sometimes when dealing with FHA loans. The loan does have mortgage insurance because we put less than 20% down.
The loan officer says we can save around $100 a month which would significantly help if we are renting it out because as it stands we would barely break even and possibly lose $500-$1000 a year by renting it but we are so bottom up on it it's not worth selling either. Can we do it, make sure it closes, and then move without a problem?
FHA loans require you to occupy the property as owner occupied for 1 year - with the exception if you refinance it as a non-owner occupied property with FHA financing (which can be done with several lenders). There is a higher rate for non-owner occupied FHA refinancing, but still would be lower than you are currently at. Make sure your loan officer is treating it as a non-owner occupied FHA refinance, you do not want to commit occupancy fraud with the federal government.
What would the rate be if we refinanced that way? Approximately? And is there still no fees or closing costs for non-owner occupied refinance? Would it make a difference if we vacate before we apply for it?
Usually the rate is about .25% higher for non-owner occupied FHA refinances. You can still get a no cost refinance, but not all lenders may offer it (no cost refinance on non-owner occupied FHA, or non-owner occupied FHA).
Doesn't make a difference if you vacated it before you apply for the refinance, you could still do it as a non-owner occupied refinance with FHA.
Do you know of any lenders that offer the no cost refinance? We are currently speaking with a Wells Fargo associate but I'm not sure if they will offer it at the non owner occupied. Another private mortgage company we spoke to ask questions on said we would have to come up with some costs. Just wasn't sure if there were any out there that you know of that sometimes or do offer it.
Are there any other catches to this type of refi? Even if we were to sell the house in a few years, this wouldn't really hurt us any would it? It's lowering our payments with no fees out of pocket but are there other fees built in, etc? Ideally, keeping it as an investment would be ideal in the long run. The only option that would hurt us is if we went to apply for a home loan again we would have a hard time getting an FHA but considering only my boyfriend is on the loan and I'm not, I'm assuming this would make it much easier and we could justify the second loan because we changed jobs (I may be taking a regional sales position down there). I have no home loans out and good credit which should be great by the time we are ready to buy again. Other than that, again, is there any loopholes or things we should be aware of?
You'll pay another upfront mortgage insurance premium of 1%, which may or may not be covered by the "no closing cost" deal the lender offers. You'll also get a partial refund of the upfront mortgage insurance premium you paid on your current FHA loan as well, to help offset the new 1% fee.
After re-reading that part of your post, I realize you may not have a lot of equity. I looked into it and found that the maximum loan-to-value would be 75% based on the appraisal... so that very well may exclude that as an option.
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