Refinances

Information by State  Print version  Email this to a friend

Chapter 2
Mortgage Credit Guidelines
Page 2-19

In computing maximum allowable mortgage amounts the following must be applied:

A: No cash-back refinances (non-streamlined): The maximum mortgage is based on the lesser of the three calculations below:

1: 97.75% (or 98.75% if $50,000 or less) of the property’s appraised value exclusive of closing costs.

2: 97/95/90 percent (as appropriate) of the sum of the property’s appraised value plus closing costs. Discount points and prepaid are not included in this calculation.

3: Sum of existing first lien, closing costs, prepaid expenses, borrower paid repairs required by the appraisal, discount points, subordinate financing, etc., minus any refund of up-front MIP. The prepaid expenses are limited to per diem interest and hazard/flood insurance, property tax and mortgage insurance impound. NOTE: Pre-paid items for the impound account may not be included in the new loan amount if the refinancing lender is the same as the servicing lender or the lender being paid off, since the existing impound account may be transferred.

B: Streamline refinances with appraisal: They are calculated on the lesser of the following calculations:

1: 97.75% (or 98.75% if $50,000 or less) of the property’s appraisal value exclusive of closing costs.

2: 97/95/90 percent (as appropriate) of the sum of the property’s appraised value and closing costs. Discount points and prepaid items are not to be included along with closing costs nor added to the property’s appraised value.

3: Sum of existing first lien, closing costs, pre-paid expenses as noted above, and reasonable discount points minus any refund of up-front MIP.

C: Streamline Refinance without Appraisal: The maximum mortgage is limited to the unpaid principal balance, minus any refund of mortgage insurance premium (MIP) plus the new up-front MIP. The unpaid principal balance does not include interest or current month’s payment.

D: For all refinances, the case binder must include the payoff statements and the calculations used for the Mortgage Credit Analysis Worksheet. Also, submit the refinance cost breakdown form or a similar form that identifies payoff and closing costs used to calculate the loan amount.

Please see: HUD Handbook: 4155.1 Pages 1-11A, 12A; and pages  2-12, 2-13; Also see: Mortgagee Letters 96-18, 97-26.

Note: Any of the forms cited above can be obtained at the HUDclips forms webpage.