If you have an FHA loan and are considering a streamline refinance – you might want to wait until December to complete it.
Here’s why…
FHA has strict rules on maximum loan amounts for Streamline Refinances.
…In other words they have limits to how much closing costs, and prepaid taxes and insurance that can be rolled into the new loan.
The problem comes from funding your new escrow account. This time of year (fall) we have to collect around 13 or 14 months of taxes to put into your new escrow account. We have to do this so there’s enough money in the new account to pay the taxes when the bill comes out.
…Consequently, the borrower usually ends up having to bring money to get their Streamline Refinance loan closed, because the total of the closing costs plus the new escrow account funding exceeds the FHA max loan amount.
Your county generally will send out the tax bill in late November. Your mortgage company generally will pay this bill in December.
Once the tax bill has been paid by your mortgage company – then we only have to collect 3 months of taxes to put into your new escrow account.
That’s why you might want to wait until December to complete your Streamline Refi – unless you don’t mind bringing money to close.
Have a good weekend!