FHA announced in early August 2010 that starting in September 2010 they would start offering a short refi loan program called the FHA Short Refinance. This refinance loan program is for homeowners who owe more on their mortgage than their home is worth. The second big FHA short refi qualification requirement is that the homeowner must be current on their mortgage payments.
FHA Short Refi Requirements
Current on existing mortgage
Must owe more on mortgage(s) than home is worth
Must have a middle credit score of 500 or greater
Must qualify for standard FHA underwriting requirements
Home cannot be an investment property or second home – must be a primary residence
Homeowners existing mortgage company must agree to writeoff at least 10% of the existing mortgage principal balance owed
The combined loan balances between a new FHA first mortgage (due to the short refinance) and an existing second mortgage balance (if one exists and they agree to the short refi) cannot exceed 115% of the home’s value
The first mortgage being refinanced cannot be an existing FHA mortgage
The new FHA short refi loan must not exceed 97.5% of the home’s current market value (yes you will have to get an appraisal on your home)
In reading this list, you may ask the question or be wondering about whether your second mortgage lender will be interested in giving you permission to do a FHA short refi. To address this concern, as it is a real concern, the US Department of Treasury will provide incentives to second mortgage holders who agree to partial or full release or extinguishment of their mortgage lien in a property.
To determine if you are eligible for this program, it is recommended that you either contact your current lender, or contact a new mortgage lender. You can start by completing the form below.