Short Refinancing, does it really exist? Listen up underwater homeowners, this is for you. Let me start by explaining what Short Refinancing is. Short Refinancing is similar to a Short Sale; however, it is not mandatory that the owner sell the property.
With a Short Sale, the underwater homeowner has to sell their home. The proceeds from that sale are, in most cases, less than the amount due on the loan. The lender has to agree to a Short Sale to pay off the loan.
When you're underwater but still want to keep your home, Short Refinancing is an option. You will get to stay in your home while you obtain a new refinanced loan that will be based on the current market value of your property. The new loan will be "short" or less than the amount due on the loan. Your lender will have to agree to the new Short Refinancing loan as payoff of the loan.
This being said, many people still ask, "Do Short Refinances Real Exist?"
HUD would agree that it does and a press release titled, "FHA Launches Short Refi Opportunity for Underwater Homeowners" has just been released.
Here are the requirements to be eligible for this type of loan:
* Must owe more on their mortgage than the property is worth.
* Have to be current on your existing mortgage.
* Must qualify for the new loan under standard FHA underwriting requirements and have a credit score greater than 500.
* Property has to be homeowner's primary residence.
* The first lien holder must agree to write off at least 10% of the unpaid principal balance, which would bring your combined loan-to-value ratio to no higher than 115%.
* The existing loan you are refinancing cannot be an FHA-insured loan. The refinanced FHA-insured first mortgage has to have a loan-to-value ratio of no greater than 97.75%.
To answer the question, "Do Short Refinances really exist?" Yes, they do. However, with this new FHA program, it is harder to complete.
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