The last several years have been hard on many families. Millions of people have lost their jobs. Many have been laid off multiple times from different employers and keep finding themselves going back to work for less money. A lot of Coloradans bought their homes at the height of the market and find that they can’t sell because they owe more than the current market value on their houses.
As hopeful as we all try to be, it seems like the economy keeps dragging. But there is at least one bright spot. Extremely low interest rates mean families can refinance and save significantly on monthly payments.
For the first few years of the recession, that wasn’t possible for most homeowners who were underwater, but the Federal government has rolled out several programs to help borrowers who owe more than their houses are worth.
HARP
The Home Affordable Refinancing Program allows homeowners who financed their purchase with a conventional loan to refinance even if they’re underwater as long as Fannie Mae bought the loan. Fannie Mae has bought millions of mortgages. Even if you’re paying your bill to a bank like JP Morgan Chase or Wells Fargo, Fannie Mae could own it.
HARP allows families to refinance underwater mortgages if:
- Fannie Mae owns it
- It was sold to Fannie Mae before May 31, 2009
- The mortgage hasn’t previously been refinanced under HARP
- The borrower is current on payments
- The borrower has reasonable ability to pay the new loan
- The refinancing improves long-term affordability
FHA Streamlined Refinancing
This program allows homeowners who bought their properties with FHA loans to refinance without an appraisal or full credit report. The refinancing option allows mortgage companies to use the previous loan amount as the property value for underwater mortgages as long as the borrowers:
- Closed on the loan before June 1, 2009
- Are current on payments
- Have made all payments within the month due (if the mortgage has less than a 12-month payment history)
- Had no more than one 30-day late payment in the preceding 12 months and made all mortgage payments within the month due for the three months prior to the date of the new loan If the mortgage with a 12-month payment history or greater,
- Have not refinanced within the last 210 days
- The refinancing reduces monthly payments or provides some net tangible benefit to the homeowner
- The loan balance does not increase to cover closing costs
VA Interest Rate Reduction Refinancing Loan
The Department of Veterans Affairs developed this program to make it easier and more affordable for veterans to refinance their VA loans. The program is streamlined so the veteran does not have to provide paperwork for his income and assets or an in-depth credit report. Mortgage companies can use the home’s initial sales price as its current value as long as:
• You originally financed the home with a VA loan
• You currently or previously occupied the home
• You do not increase the loan amount to pay any other debts
Please feel free to contact the mortgage experts at Freedom Financial Services for more information about any of these programs designed to make homeownership easier and more affordable for families in changing financial situations.
