In an effort to make housing more affordable for the nation’s distressed homeowners, President Obama recently enacted the “Home Affordable Refinance” program. The goal of the program is to lower monthly mortgage payments to those homeowners who are staying current with their mortgage but who have experienced a drop in the value of their homes.
The program is designed to give homeowners the opportunity to refinance their mortgage who otherwise have been unable to up to this point because they currently owe more on their mortgage than their home is worth. In order to qualify, homeowners need to meet four criteria…
They need to be the owner of a one- to four-unit home.
The mortgage is owned by Freddie Mac or Fannie Mae.
They need to be current on their mortgage payments (meaning no payment is more than 30 days late over the last 12-month period).
The outstanding balance of the mortgage is no more than 105% of the property’s current value.
If you meet these criteria and can provide proof that you have income sufficient to support the new mortgage, you may be eligible to refinance.
The government has set up a website with information on the program at www.makinghomeaffordable.gov. On it, you’ll find information on this and the Refinance program’s sister the “Home Affordable Modification” program. The site offers a simple mortgage refinance eligibility calculator (essentially the four criteria listed above) to see if you qualify, a link to the Freddie Mac and Fannie Mae websites where you can see if your mortgage is owned by one of the two entities, and a FAQ section which covers any questions you may have regarding the refinance such as whether or not you can do a cash-out refinancing (you can’t) and whether or not you can reduce the amount of your mortgage loan (you can’t there either).
If you find out that you’re eligible and wish to refinance your mortgage, the next step is to contact your mortgage lender and ask about the Home Affordable Refinance program. Make sure you have all the paperwork you’ll need nearby such as tax returns, pay stubs, and other financial statements.
While this program isn’t designed to include all distressed homeowners, it may just be the lifeline many homeowners need to stay in their home. If you find out that you’re not able to refinance your mortgage via this program, you may find some relief under the “Home Affordable Modification” program whose eligibility is a bit more broad (and I’ll discuss in a future article).
Help is out there if a mortgage refinance is what you need to stay afloat. If you need more urgent help, the “Making Home Affordable” website offers the Homeowner’s HOPE hotline at (888) 995-HOPE.