Many people that I speak with about the Arizona FHA streamline program ask me the question “how do I know whether or not I will need an appraisal?” There is an easy answer to this question, but it can sometimes be difficult to articulate.
If your new total loan amount is more than 1.5% higher than your old loan amount, you will need an appraisal when you participate in the FHA streamline program.
So as an example:
- Old total loan amount = $100,000
- Net total loan amount = $102,000
In the above scenario, an appraisal would be required.
Another example:
- Old total loan amount = $100,000
- Net total loan amount = $101,000
In the above scenario, an appraisal would not be required.
The reason that 1.5% is the magic number is that the 1.5% is the exact amount of your Up Front Mortgage Insurance Premium (UFMIP) and your new loan amount can’t increase by more than your old total loan amount plus the amount of UFMIP charged by FHA.
The good news about UFMIP
The good news about UFMIP is that FHA will let you use whatever is left in your current FHA UFMIP account as a credit towards setting up your new loan. So if your new UFMIP is $1,500 but you currently have $1,200 in your MIP account, FHA will only require that you pay another $300.
The bad news about UFMIP
The bad news about UFMIP is that every time you go through the FHA streamline program you will be required to pay the UFMIP – and it is currently 1.5% of your loan amount.
When particpating in the FHA Streamline program, be sure to ask your loan officer what the criteria are for whether or not you will need an appraisal. You may be surprised how difficult it can be for him to explain this relatively simple answer – I have even stumbled a few times myself.
[...] A. No- An appraisal is not required on an FHA streamline unless the new loan amount exceeds the old loan amount by 1.5%. [...]