New refinance and mortgage modification programs 2012

There are currently three major government programs you should look at it to see if you qualify, even if your house is underwater.

1.  The Home Affordable Modification Program (HAMP) is aimed at allowing struggling homeowners to lower their monthly payments. You may qualify if you signed up for your mortgage no later than Jan. 1, 2009, are employed, have a mortgage payment that’s more than 31% of your pre-tax income, and can prove that you’re at risk of — or actually have — fallen behind on your mortgage due to financial hardship.  Get more details at the Home Affordable Modification Program area of the Federal Government’s Making Home Affordable site.

2.  The Home Affordable Refinance Program (HARP) is designed to help homeowners refinance to a lower interest rate in instances when they owe more on their home than it’s worth. The program kicked in as mortgage rates were dropping.  It allows homeowners who previously couldn’t refinance to get a new, lower rate that would make monthly payments smaller.
Qualifications include all of the following:

Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae. You can check both at the Making Home Affordable site set up by the Federal Government.

  • Your mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • Your mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  • The current loan-to-value (LTV) ratio must be greater than 80%.
  • You must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

There’s more information at the the Home Affordable Refinance Program site.

3. FHA Short Refi Program. Launched in 2010, the Federal Housing Administration’s Short Refi Program is supposed to help homeowners who are current on their mortgage, but at risk of defaulting because they have no equity in their homes thanks to dropping property values.  The program provides borrowers with a principal reduction while also refinancing them into a new mortgage insured by the FHA.

To be eligible for a new loan…

  • You must have a non-FHA mortgage and be current on your mortgage.
  • You must owe more on your principle residence mortgage than your home is worth.
  • You must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500.
  • This is the tough one:  Your existing first mortgage holder must agree to write off at least 10% of your unpaid principal balance, bringing your combined loan-to-value ratio (of both first and second mortgages) to no greater than 115%.  (So if your house is worth $200,000 and the mortgage is $250,000, the lender has to forgive $25,000 in principle, which will bring loan-to-value ratio down to less than 115% ($225,000)).  The lender gets some incentives for doing this, one of which is FHA insurance on the balance.

View qualification requirements and more at the FHA Short Refi Program page. Consult your lender if you think you might qualify for this one.

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