In early August 2010 FHA announced a new product The FHA Short Refinance” effective September 2010. This refinance loan program is for homeowners who owe more on their mortgage than their home is worth.
FHA Short Refi Requirements:
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 write off 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 whether your second mortgage lender will be interested in giving 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.
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