A "short refinance" is a transaction in which the lender agrees to allow the borrower to refinance the home for the current market value, in effect making it more cost effective for the borrower. The new lender agrees to replace the old lenders current loan with a new one and the old lender forgoes the difference.
FHA Short Refinance
Typically you receive a new interest rate, which is often lower than their former one - resulting in a reduced mortgage payment.
You may be eligible for FHA Short Refinance if you meet the following criteria:
Your mortgage is not owned or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA.
You owe more than your home is worth.
You are current on your mortgage payments.
You occupy the house as your primary residence.
You are eligible for the new loan under standard FHA underwriting requirements.
Your total debt does not exceed 55 percent of your monthly gross income.
You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
You may be eligible for HARP if you meet all of the following criteria:
The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
The current loan-to-value (LTV) ratio must be greater than 80%.
The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.