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Can you refinance your house if you owe more than it is worth?

June 18, 2008

Generally speaking — no.

Generally speaking.

However… if you currently have an FHA loan… you may be a candidate for a program called the FHA Streamline program and refinance your house even though you may owe more than it is currently worth.

Everywhere you read these days, the data shows that many homeowners who bought at the “peak” are now unfortunately upside down on their mortgage.

Look no further than our own Arizona Republic for many articles on this or maybe the latest statistics from ASU’s WP Carey School of Real Estate — it is clear that there are many people in Arizona who currently owe more than their home is worth.

For example, let’s say in 2005 you took out an FHA Adjustable Rate Mortgage (ARM)  loan for $200,000 at 6% and because of the housing crisis, your home is now worth $175,000 but you still owe $195,000.

Not only has your home value fallen, but if you were in an adjustable rate mortgage, your interest rate may have gone up causing an increase in your monthly mortgage payment.

If you’re in a conventional loan you might have a hard time refinancing because an appraisal is necessary and it would clearly show that you owe more than your home is worth.

However, if you are in an FHA loan, you might be able to do an FHA Streamline refinance.

Here are HUD’s summarized guidelines for an FHA Streamline:
In order to qualify, you must be currently in an FHA insured loan.

  • Your current FHA insured mortgage cannot be delinquent.
  • No cash out may be taken on an FHA Streamline refinance
  • No FICO score necessary – just a verification of mortgage
  • No income or asset qualification or documentation needed
  • No appraisal if the new BASE loan amount is the same or less than the original NOTE loan amount

Just this week I have a couple in Queen Creek who were able to do an FHA Streamline Refinance.

They were able to take charge of their future finances and lock into an FHA 30 year fixed interest rate, keep their monthly payments at about the same amount and now they can sleep at night not worrying what their monthly payment will rise to when their interest rate adjusts.

Are you in an FHA adjustable rate mortgage and your payment is going up soon and need to refinance so that you can afford to keep your home?  Maybe an FHA Streamline Refinance could help you too!

Filed Under: Arizona Home Financing Options, FHA Loans, Refinancing in Arizona

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