Understand FHA Short Refinance Requirements and Then Apply

By: swhlhili678 | Views: 927 | Date: 17-Mar-2011

The program for FHA short refinance is voluntary as far as the lenders are concerned and the credit score of an applicant might get affected depending on whether the lender has reported the principal reduction on the loan amount as being repaid in full or partial refinance.

It is better to consult your mortgage loan expert or an attorney before applying for any mortgage refinance program and a thorough check of the service history of all the mortgage refinance companies should be carried out so that the right company is selected. Many home owners who have taken their first mortgage loan and have been lucky enough not to face any financial setback will not be aware about anything related to from where to refinance mortgage loan in case of financial crisis. Mortgage refinance companies offer mortgage refinance programs to people who apply for mortgage refinance as they are facing major financial crisis which in turn is affecting their ability to make monthly mortgage payments.

There are many types of mortgage refinance programs available for people with good and bad credit out of which the FHA Short refinance is one of the options. FHA short refinance program is offered to people who have an underwater mortgage. An underwater mortgage means a mortgage that is much more in worth than the value of the home. If the current mortgage is not FHA insured then it is beneficial for people with underwater mortgage to go for FHA or Federal Housing Administration short refinance plan. This mortgage refinance program insured by the FHA was implemented and effective from the 7th of September, 2010.

The FHA short refinance program allows people with underwater mortgages to secure a principal reduction on their mortgage thus providing a second chance to people to refinance their mortgage which will be FHA insured. Not all applicants will be approved the FHA short refinance plan as there are different FHA short refinance requirements which need to be met before one can expect approval on the short refinance mortgage plan. Let's take a look at who can and who cannot apply for this mortgage refinance program and what are the other requirements for this plan.

  • People who have bought a home and then are unable to repay the loan amount will not be benefited from the FHA short refinance program.
  • Defaulters on vacation homes, investors and speculators and people who have bought homes priced really high such as in millions will not be able to qualify for FHA short refinance plan.
  • The first mortgage taken by the home owner should have a loan to value ratio of no more than around 97.75%.
  • The mortgages availed the second and third time should be re-subordinated or waived off and only the new loan should have a loan to value ratio of around 115%.
  • As far as lenders are concerned the FHA short refinance program offers incentives to second lien holders who provide full or partial forgiveness of the security.
  • Applicants can only avail of FHA short refinance if he/she is updated on ones mortgage payment and if the home on which the mortgage has been availed is the primary residence of the owner.
  • The applicant should also submit full, accurate and detailed document on the proof of income and his credit score should be above 500.

Author is a regular writer on RefinanceItt.com; a US based portal which provides detailed information on FHA short refinance, where to refinance mortgage and other mortgage refinance program related issues.

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