FHA Principle Reduction Refinance

Refinancing at current market value is the better option than loan modification. It is a transaction, where the current lender agrees to accept less than the full amount owed on your property. It results in reduction of principal on your loan. A Short Payoff is when your current lender reduces the principal balance on your mortgage and allows you to refinance or sale your home at current value.

Key differences:

Loan modification negotiates change in rates and terms leaving principal unchanged.

FHA Principle Reduction Refinance negotiates reduction in principal.

The process is similar to a short sale but, instead of the property being sold, it is refinanced with a new lender. The short-refinance allows the homeowner to retain ownership of the property.

In many cases, short refinance requires approval and consent from a new lender and will require better credit score along with a reasonable debt-to-income ratio. We are working with the largest pools of lenders, which are available to help with short refinance.

Refinancing at Market Value

Must be current on mortgage payments
Minimum middle credit score is 640
No more than one 30 late mortgage payment in last 12 months
Documentation of three most recent mortgage payments
Payoff letter
Written Principal Reduction Agreement from current lender – The agreement must include the name of the borrower and must indicate the loan amount being paid off
Primary residence only
Must have sufficient documented income to qualify for the new lower loan amount (no stated income)
Must be able to prove hardship
Borrower with two mortgages are not eligible at this time

Many lenders are now cooperating with a principal reduction to refinance your home.

Step 1: is to contact your existing lender and verify that they will cooperate with a short payoff/settlement to refinance.

Step 2: is to apply. We will request your employment, income, and asset documentation to verify that you will qualify for a new FHA loan at current market value and issue a loan approval.

Step 3: is to actively work together to negotiate with your current Lender to achieve the desired principal reduction for your refinance.

EXAMPLE: Short Refinance (Refinancing At Current Market Value)

Current mortgage: $300,000

Current value: $220,000

New loan (97.75% of current value): $215,050

Closing cost for new loan: $5,000

Current lender approves short payoff for: $210,050

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