2010 will be known as the year that everything changed for the Real Estate market. Waiting for this to happen has taken some considerable time and patience but now that it is here it's time to take advantage of this situation. It has been talked about many times over, proposed in many forms but now the Short Refinance makes it possible to exchange an upside down mortgage into a right side up one!
Previously people had heard that a short refinance was possible but couldn't find a way to get it done. In 2010 the short refinance will become possible thanks to a new set of criteria handed down from above allowing this to all come together.
Here are some of the steps in the process:
1. The initial evaluation will need to demonstrate a need. This need will have to be income related so it is important to understand your debt to income ratios as it relates to your existing loan and your potential new refinance. There is a window of opportunity there that people need to squeeze into in order to qualify.
2. We will need to negotiate with your existing lender to get them to agree to a short payoff. Not just anyone will qualify for this, of course, as we will need to demonstrate a need based upon some level of hardship. It's important that this short payoff include both the first and the second mortgages and have a loan to value of approximately 95% of current appraised value.
3. To even qualify for the take out mortgage you cannot miss any mortgage payments. In other words, the refinance loan requires no missed payments so negotiating for a short payoff with missed payments will only result in a potential short sale NOT a short refinance. The new refinanced loan will be a traditional FHA loan so the FHA guidelines do apply.
Understanding the process and managing your expectation during this process will not only keep you sane but will keep those helping you sane as well. My best advice is to assume it won't happen and if it does BONUS!
Short sales can also be done in this manner as you can sell your home for less than what you owe and then turn around and buy another home without an issue.