FHA Short Refinance option may be the newest option to help homeowners with their mortgage.

Available to qualified homeowners on Sept. 7, these new FHA loans require banks to write down at least 10 percent of the unpaid balance of the first mortgage. The program ends Dec. 21, 2012.

The new loan product, called the FHA Short Refinance option, is targeted for those homeowners who are paying on time, but saw large declines in home values in their local markets. If your home is underwater and your interest rate is above 6 percent, you should definitely consider this. Even if you have a good interest rate, the write-down of your first and/or second mortgage may make this deal worth considering.

To qualify for this FHA refinance opportunity, you must be current on your mortgage, and your lender or investor must be willing to write off at least 10 percent of the original first lien on the mortgage. The big hitch is that you must have the consent of your current mortgage lien-holders, so if your lender refuses to participate, you won't be able to take advantage of this refinance program.

For your loan to qualify, you must meet these conditions:

- Your mortgage must be in a negative equity position.
- You must be current on your mortgage to be refinanced.
- You must occupy the subject property (one to four units) as your primary residence.
- You must qualify for the new loan under standard FHA underwriting and your FICO score must be greater than or equal to 500.
- Your existing loan must not be an FHA-insured loan.
- The existing first lien-holder must write off at least 10 percent of the unpaid principal balance.
- The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent.
- If you have other subordinate mortgages (such as an equity line) they must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent.
- Your total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income. And total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income.
- You cannot use the new FHA mortgage to pay off existing debt obligations in order to qualify for the new loan.

Source: http://realestate.aol.com/article/exper ... 1009020001