President Obama's federal program, called Home Affordable, offers 2 basic options to struggling homeowners. The first is a streamlined refinance program and the second is a standardized loan modification plan. You may qualify for help under one of these programs - but which one is best for your situation? Here is some information on the programs and what you need to qualify for each one to help you decide.
The Home Affordable Refinance Plan is designed to help homeowners who are current on their mortgage, but have been unable to refinance due to a allowance in their home's value. The program will offer 30 or 15 year terms and will be branch to current market rates and closing costs. Here are the basic requirements for eligibility with this government subsidized refinance program:
Current Fannie Mae Refi Plus Programs
- Cannot have been delinquent more than 30 days in the last 12 months
- Must live in the home as your customary residence
- Loan is owned or controlled by Fannie Mae or Freddie Mac
- You owe no more than 125% of your homes current value
- Must be able to prove earnings to support new mortgage payments
- Only applies to first trust deeds-if you have a second that lender must agree to subordinate behind the new loan
If you can meet these qualifications, then the refinance program may be an choice for you. Keep in mind that if your current loan has a negative amortization choice with an highly low rate, or you are paying interest only, your new payment may certainly increase. The goal of this program is to offer the opening for homeowners to secure a fixed interest rate loan.
The loan modification plan has distinct requirements for approval. Your home loan does not have to be serviced by Fannie or Freddie, but does have some other criteria that you must meet. Here are the basics of the Home Affordable Loan Modification Plan:
- You must live in the home as your customary residence
- Your requisite balance must be less than 9,750 for 1 unit, more for 2-4 units
- Loan must have been originated prior to January 1, 2009
- Your current payment, including taxes, guarnatee and homeowners dues must equal more than 31% of your monthly income
- Be able to demonstrate a financial hardship situation exists
If you answered yes to all of those items, you could be a good candidate for this loan modification plan. Lenders are more motivated to help homeowners under this program because they will be paid by the Treasury agency for every mighty loan that is modified. You do not have to be late on your payments to apply, but you must show that an imminent hardship exists that will cause hereafter delinquencies.
Second loans are also eligible under the Home Affordable Modification plan. Interest rates will be reduced to as low as 1%, and unavoidable loans may be retired or forgiven altogether with the Treasury agency reimbursing the lender at 12 cents on the dollar. If you have a second loan, be sure to apply for a loan workout on that mortgage as well.
To apply for the loan modification plan, you will be asked to put in order an application and contribute unavoidable documentation. You must be sure to complete your forms correctly so that you clearly demonstrate your ability to pay and profess the new modified payment. Your lender will base it's decision mainly on the information you contribute to them, so make sure you do it right. This could be the second opening you need to stay in your home.
Obama's Federal Loan Modification Or Refinance - Which is Right For You?
