If your current mortgage was endorsed by the FHA before June 1, 2009, the upfront premium is 0.01 percent of the loan amount, says Parsons. "It is a cost, but not usually an out-of-pocket cost, since it is almost always added to the loan balance," he says.
In addition to the upfront premium, these loans also require an annual premium -- paid monthly -- of 0.55 percent of the base loan amount.
FHA mortgages endorsed after June 1, 2009 have a much higher upfront premium of 1.75 percent. The annual premium varies by loan term and loan-to-value (LTV) ratio. It ranges from 1.25 percent (30-year term, LTV over 95 percent) to as low as 0.35 percent (15-year term, LTV under 90 percent).
Currently, the annual premium must be in place for at least five years, and after that time, it can be cancelled whenever the loan balance has been paid down to 78 percent, Parsons says.
Changes are coming
For FHA loans registered after April 1, 2013, the annual premium will increase by 0.10 percent, he says. In addition, the annual premium will have to be paid for the entire life of the loan if the initial LTV is more than 90 percent.
If you're considering a streamline
, act now before the April changes go into effect, says Parsons. Increased premiums mean fewer borrowers will be able to lower their monthly payment by the five percent requirement, he says.
Talk to your lender
Even though the streamline refinance program has more lenient requirements, some lenders will apply additional restrictions known as "overlays." For example, even though the FHA doesn't require income or credit verification, certain lenders lender might, says Auerbach. "Ask the lender upfront if they have overlays," he says.
The FHA frequently changes their programs, so it's important to talk to FHA-approved mortgage lenders to get the latest details and learn about potential overlays, says Auerbach.