They have also heard about a “loan modification”.

But something that is relatively new – and proving to be at least somewhat effective in this situation is the FHA short refinance.

Essentially, the FHA short refinance works similar to a short-sale, BUT rather than sell your home to someone else, you refinance the property and get a new loan for 95% of what the appraised value of the property is worth.

And the #1 secret to getting a short refinance done is…

Pick up the phone and ask your lender for a short sale packet.

Once your lender knows that you are in the process of either short selling your home or something worse – they will transfer your file to the “loss mitigation” department who will then be your contact. Once you get there, you will want to simply ask your lender if they will accept a “short refinance” – and you may be surprised at how many times they say “yes”.

The reasons they say yes?

Because chances are pretty good that they bought your mortgage for pennies on the dollar and they stand to make a profit if you refinance — because it will take the mortgage off of their books and they can record a profit.

So — if you are wondering what the first step to getting a FHA short refinance done is –

Pick up the phone and call your lender.

Sound familiar?

What many people don’t know is that there is actually a way better solution to this problem than loan modification – it is called an FHA short refinance. An FHA short refinance works much like a short sale – except that you get to keep the house rather than sell it to someone else.

If you think that the FHA short refinance program might be right for you, the first step is to get on the phone with your lender and tell them that you are interested in SHORT SELLING your home. Once they hear that, they will usually transfer you to the loss mitigation department – which is the right one.

Once you get to the loss mitigation department, you want to negotiate for something called a SHORT PAYOFF – which means that the lender will agree to accept less than you currently owe. If they say they won’t allow short payoffs, then ask them what they are doing when they accept a SHORT SALE.

No matter what – don’t take NO for an answer! Many times (most of the time) the lender will give you a different answer depending on who you talk to. If you don’t get the answer you want – just try back the next day and speak with someone else.

Once you get the SHORT PAYOFF, then you should be able to get any FHA loan officer to help you get a new FHA loan for that amount – and easier than you can say the words “loan modification”, you will have a new fixed rate FHA loan that is 95% of what your home is now worth.

Don’t give up! A FHA short refinance can be a much better long term solution than a loan modification.