Refinance Your Home Even if it’s Underwater with the Making Home Affordable Program


in Frugality,How To...,Mortgage,Savings

If your home value has decreased and you don’t think you can refinance you still may be able to refinance at today’s mortgage rates. The Making Home Affordable program from the US Federal Government is designed to help homeowners who may have Adjustable Rate Mortgages that are adjusting or have loans with higher interest rates who may not qualify for conventional loans due to their home value versus their mortgage balance. There has been a lot of rumblings and rumors and with all the issues with sub prime loans it’s easy to think this is just another scam. This program is run by the federal government so you can have some confidence that this program is to help homeowners especially since we paid billions of our tax dollars for these programs and bailouts

How Does the Program Work?

Your first stop should be the official website Beware of any other sites that may lead you into some undesirable loan programs. The key is that you should never have to pay any upfront fees. This is a relatively new program and a lot of the mortgage brokers and banks are still working out the kinks of this system, so take this into account when you get started. Once you are on the site you can determine if your loan meets the general criteria to pursue a refinance or an adjustment with your current provider by filling out their questions. What will come out of this process if you are approved is a refinance or an adjustment to a conventional mortgage.

Who Can Qualify?

You can potentially qualify if your loan is either a Freddie Mac or Fannie Mae mortgage. If you don’t know what type you have you can look them up at either or odds are good that you have one of the two types this encompasses approximately 5 million homeowners. If you don’t have either of those you may still qualify for a loan adjustment, again check out the website. To qualify for a refinance you also need to be current on your payments and you home value needs to be close to or less than your first mortgage (your 2ndis not included in this calculation). The guidelines state that the refi can be up to 105% of the value of your home on your first mortgage. For example if your home is worth $200,000 but you owe $210,000 or less on your first mortgage you may qualify. The current value of your property will be determined after you apply to refinance.

Will I Owe Less on My Home?

No. The Home Affordable Refinance Program (HARP) is to help you get a more manageable loan. If you are in a 7.5% APR first mortgage you’ll benefit greatly by being able to reduce your APR to current rates which for a 30 year on 6/9/09 is under 5%. The rates you get on the refinance are the same as you would get for any other loan.

Do I Need spend $400+ to Get My Home Appraised?

No not necessarily. It really depends on the values in your area but you may be able to avoid this altogether.

How to Get Started

The first step is to call your lender and tell them you are interested in the Making Home Affordable Refinance program. If you don’t have luck with the first person you talk to, keep trying with someone else. The lenders are still figuring this out. Second, be persistent and don’t give up.

Real Word Experience

You may be asking yourself, “FiscalGeek how do you know so much about this program?” My wife and I are going to close on our refinance this week thanks to this program. It has been a long 9 week process but it’s allowing us to move from a 6.75%APR first mortgage to a 5.0% first with no appraisal. Our combined first and second mortgages were higher than home values in the neighborhood and we didn’t really have any other options. I also didn’t want to pay out $500 for an appraisal when I was not sure we’d be valued higher than what we owed. Fortunately I happened to be talking to someone at my bank who had just been through training on this program. They have been doing a lot of learning on their end as well but it’s finally coming to completion this week. Woot! For a $250 savings a month it’s worth it. Good luck and let us know your story in the comments below.

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