FHA Short Refinancing
Sometimes the fickle real estate market works against conventional mortgage holders. One such case is if market conditions render the mortgage to be worth more than the value of the home. The homeowner may then be eligible for the FHA Short Refinancing program.
There are several important facts the loan holder needs to be aware of about this federal program. In order to be eligible, they must owe a minimum of 15% on their mortgage than what the home is now worth. The “new” mortgage issued under this program would be more a maximum of 97.75% of the then current value.
Several conditions must be met by the homeowner in order for FHA Short Refinancing to happen. There is an application process and several important conditions.
WHICH LENDERS CAN DO THIS?
Many homeowners are not aware this opportunity exists. This is because the program is “voluntary”. Lenders do not advertise or market this plan, unlike how they promote a conventional refinance.
Because of this, not all lenders offer FHA Short Refinancing. The homeowner needs to check with their mortgage servicer to find out if it is offered. First, the homeowner needs to have reason to request this type of refinance.
This is where tracking local property values is an important step. Lenders are not going to notify you when your property value drops. Market conditions dictate what happens. Anything from a drop in the local economy to a slow real estate market can lead to lower home values. An unfortunate event or disaster could severely impact property values within a community.
Real estate web sites (such as Realtor.com) allow homeowners to check on current conditions. Asking prices of local homes for sale, along with recent sale prices, are updated daily and available for comparison. Another way to find the current value of the home is to request a free no obligation all cash offer. You can contact Staten Island All Cash Home Buyers, and receive a no strings attached cash offer for your home.
Ideally, the homeowner provides reasonable evidence of owing at least 15% more than the current home value. It is an important consideration prior to facing application procedures and origination fees. As further clarification, this is the amount of the mortgage and not the amount paid for the house. An original down payment amount would not be included.
CURRENT MORTGAGE STATUS
However, ownership of the “current” mortgage is important for these reasons:
- Must meet FHA eligibility requirements to obtain a new mortgage
- Must not be owned by the Federal Housing Authority (FHA)
- Must not be Veterans Administration (VA) loan
- Must not be a USDA loan
Furthermore, the homeowner must owe at least 15% more than the home is currently valued. In addition, the homeowner must not be behind on mortgage payments in order to qualify. Another requirement is that the borrower must be living in, and continue to live in the home.
Remaining requirements are focused on the homeowner. The debt to income ratio must not be greater than 50%. Chances are that pay stubs, bank statements, and tax returns will be needed as proof. The FICO score must be a minimum of 500. Also, all borrowers named on the current mortgage must not have had certain criminal convictions within the previous ten years.
To recap, FHA Short Refinancing is available for conventional mortgage holders which meet the aforementioned criteria.