Obama’s home loan modification plan is officially known as the Making Home Affordable (MHA) plan. The plan is expected to reach up to 9 million families, so that they can refinance or modify their loans and hold on to their houses during this economic recession. Even if you think you won’t qualify, think again. Learning about the requirements for modifying your home loan might surprise you.
The first criteria for modification is that your loan has to be a Fannie Mae or Freddie Mac insured loan. At the present time, only loans by those two organizations are eligible for special refinancing and modifying actions under the MHA plan. You also must be the primary resident of the house in question if you want to refinance or modify your home loan under the plan.
The MHA plan gives homeowners tow separate options. The first avenue is refinancing; the second is modifying their loan. Borrowers who have not yet fallen behind on mortgage payments and owe below 105% of the principal of their loan can take advantages of a special refinance. This is true even if they don’t qualify for traditional refinance. It’s important to know that only those who are still current on payments can refinance under the MHA act.
If you’re having difficulty making ends meet and paying your monthly mortgage premiums, then getting a loan modification with the government-sponsored MHA plan could be for you. People who are current as well as people who have fallen behind on mortgage payments can get loan modifications. As long as you own and occupy the house and have a monthly payment that exceeds 31% of your gross monthly income.
The loan modification plan target at-risk borrowers and adjusts the terms of their mortgages so they will pay below 31% of their gross monthly income. This is called their debt-to-income (DTI) ratio. The first step is for lenders to reduce the interest rate to a floor of 2% to try to meet a 38% DTI. If the interest rates hit the floor and still do not meet the 38% DTI, then further modifications can be made. The lender can extend the loan for up to 40 years, and then they can begin to forbear principal on the loan. After meeting the 38% DTI, lenders and the Treasury will work together in a dollar-per-dollar matching program to bring the rate down to below 31% DTI for borrowers.
After coming to an acceptable modification, borrowers will have three months to prove that the new loan rates are something they can handle. If they keep current for a trial period of three months, the new mortgage terms stay fixed for the next five years. This is the procedure that the MHA plan uses to prevent foreclosures and let millions of U.S. families remain in their houses.
By: Lindsy Emery
Posts Tagged ‘refinancing’
Who Qualifies For Obama’s Home Loan Modification Plan?
March 17th, 2010Refinance Home Loans to Ease Your Budget
February 7th, 2010Whether they’re lower interest rates than the one you have now or a shorter duration than the previous one you had, people refinance home loans in order to get the best loan terms they can possibly apply for.
To take full advantage of refinancing, you must try your best to have good credit standing. Remember, the poorer your credit score, the greater risk you will become to lenders, and the higher the payments you’ll end up with after the assessments have been made.
More manageable loan duration.
There are two sides to a coin – some people opt for a longer duration when they refinance home loans in order to take the pressure off their monthly payments as they spread them over a longer period, say, stretching the term from 15 to 25 years. Others, however, decide that they are better off with a shorter duration so they will be relieved of debt early and end up paying a fraction of what they were supposed to pay when they first took out a loan.
Cash when you need it
When you take out another mortgage on your home – in particular, filing for one that has a value bigger than your balance on the first loan – then you can even stand to get some cash to be used for anything you want. This is known as cash-out refinancing, “cashing out,” or dipping into your home equity.
Remember, this scheme is only for when you need cash to pay for an emergency (although various people have different perceptions of what an ‘emergency’ constitutes). The best emergency at this point is the need for you to use this cash to pay off higher-rate debts which you may have.
Nevertheless, just remember not to max out on the full value of your home – that is, to leave something for yourself, as you may need it in the future.
Use the money wisely
If you’re planning to Mortgage refinance home loans for longer periods of perhaps 20 or 30 years, it should make sense if you spend the cash bonus on something that’s also lasting, such as a useful renovation to your home or a non-cosmetic surgical procedure that isn’t covered by your healthcare plan.
Thus, think long and hard before you spend the cash on that 8-cylinder SUV or a trip to Vegas – you wouldn’t want to have to pay for that vehicle or three nights in Vegas for about 20 years or so now, would you?
What to ask lenders about refinance home loans
Always clarify details about the interest rate and whether it’s fixed or adjustable, closing costs, a loan’s qualifying guidelines, the number of points you have to pay, the documents you need to provide the lender, your application processing time, and if there are any prepenalty payments.
Good Tips on Refinance Home Equity and Mortgage Refinance
January 21st, 2010If the words “refinance home equity” and “mortgage refinance” seem very strange for you, here are a few things you should find out in order to shed some light on this field.
The first thing you need to understand is the reason for needing refinancing. Either one wants to reduce the monthly payments or to tap built-up home equity, refinancing is the key solution to your problems. Other people might want to consolidate outstanding debt, which means combining a first and second mortgage into a new first mortgage. Last, but not least, a very large number of people simply want to give up a mortgage product which is too expensive for their incomes.
There are a few common rules that any person should consider before getting into such a business. Well, the most traditional rule of a mortgage refinance is getting an interest rate at least 2% below the interest rate you are paying at that certain moment. The bad thing about this rule is that this two percent difference from your rate can cost you even more, as these low rates usually don’t come up that often. Therefore, the best idea behind getting a more suitable mortgage refinance is taking the time and properly analyzing the time and the cost factors.
The central point of interest when investigating a mortgage refinance option is the amount of money that you will need to borrow. The most common practice of the lenders is allowing you to borrow an amount of up to 80% of the current value of your home. Of course, there are lenders who let you lend more money, that is in case you simply want a refinance for your existing loan.
For those of you who want to free up cash in your home, the only way of avoiding a mortgage refinance is choosing a refinance home equity loan. Home equity loans also have their own set of risks. The fact is that all refinance home equity loans provide adjustable rates. They are very similar to the way a credit card works.
You will have to consider the fact that the lenders will generally offer you not more than 75% of the equity in your home. Of course, lenders also offer refinance home equity loans having a fixed rate, but the main idea is that they work much like a first or second mortgage on your home.
Therefore, you must be very careful when taking such a decision!
By: Dalvin Rumsey
