FHA Net Tangible Benefit Calculator
The Federal Housing Administration (FHA) updated
the underwriting criteria (rules) for the FHA streamline loan program
on April 18, 2011.
The "net tangible benefit" is the most noticeable improvement.
New streamlined loans originated after April 18,
2011, must show a 5-fixed-rate percent reduction in the principal and
interest of the mortgage payment plus the annual mortgage insurance
premium (MIP), or if refinancing from an Adjustable Rate Mortgage (ARM)
to a fixed-rate mortgage, the interest rate must be reduced by at least
2 percent or be no higher than the current interest rate.
The FHA Benefit Calculator will determine whether or not the new streamlined
loan meets the net tangible benefit criteria. Mortgagee Letter.pdf is
a PDF file that you may download and print. Please email me if you discover
a mistake, have a comment or want to make a purchase.
9/2018 was the most recent update.
Explanation of the net tangible benefit for a streamline refinance
The lender must decide that the streamline refinancing transaction, with or without an appraisal, provides a net tangible advantage to the borrower. Net tangible benefit is defined as: a 5% decrease in the principle and interest (P&I) of the mortgage payment plus the yearly mortgage insurance premium (MIP), or switching from an ARM to a fixed-rate mortgage.
Notes: A decrease in mortgage term is not a net tangible gain.
Lenders must regard the new hybrid ARM as a fixed-rate mortgage when refinancing to a hybrid ARM.
To qualify as a net tangible benefit, the new mortgage payment (P&I + MIP) must be at least 5% less than the mortgage payment of the refinanced loan. This criterion applies when refinancing from — fixed-rate to fixed-rate — ARM to ARM — Graduated Payment Mortgage (GPM) to ARM — GPM to fixed-rate 203(k) to 203(b), and — 235 to 203(b) (b).
SOURCE: FHA underwriting manual HUD 4155.1
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