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FHA Short Refinance Program

Current Mortgage Interest Rates: the FHA Short Refi Program

The Department of The Treasury and the Department of Housing and Urban Development recently announced add-ons to the federal Making Home Affordable Program and FHA mortgage rates refinancing program. These add-ons were designed to assist borrowers owing more on their mortgages than the current value of their homes.

Is the FHA Short Refi Program right for you? To utilize this program to beat current mortgage interest rates there are guidelines that you will need to meet: for instance, you must be current in your mortgage payments, and the target property must be your primary residence. The program isn’t available for second homes or for investment properties. Additionally, the existing mortgage can’t be an FHA insured mortgage; the borrower must qualify for FHA short refinancing using standard FHA underwriting guidelines; and the borrower using these special FHA mortgage rates must have a credit score of 500 or better.

FHA’s short refinance program is actually a reduction of principal program. Current first lien holders must agree to write off minimum ten percent of the mortgage’s unpaid principal balance so that the refinanced FHA insured mortgage reflects a loan to value ratio of 97.5 percent or less. In addition, any second lien holders must be willing to re-subordinate. New loans, which include the first and any second liens, cannot have a combined loan to value ratio in excess of 115%. Borrowers receiving a refer decision or applications requiring manual underwriting must have a total monthly mortgage payment — including second mortgages — equaling no more than thirty-two percent of their gross monthly income. Total debt cannot exceed fifty percent.

To help the program succeed the Treasury provides incentives to second lien holders who both participate and sign off on full or partial reduction of liens having FHA case numbers issued on or after September 7th (the initial day of FHA’s short refinance program). The new program will be available through to the end of 2012.

So if you are a home owner currently underwater but current with your mortgage payments — call the number on your mortgage bill to discover if this program would be advantageous to you. And then be prepared for your application to take extra time in its processing, underwriting and closing as there are more players in this type of transaction and all must agree to the outcome. In the end, the governmentís new FHA refi program may well help reduce the number of foreclosures — strategic or otherwise — that are continuing to hurt the national housing market.

Keywords: FHA mortgage rates; current mortgage interest rates