Lots Of People Looking To Refinance
A couple of days ago I did a pretty long post talking about the new “Making Home Affordable” program that the Obama administration passed earlier this year. In that post I gave a 10,000 foot view of the plan, what it is designed to do, and who will qualify for help under the program.
Based on the comments and emails I've received on the topic, it seems like a lot of people are trying to take advantage and refinance their existing loan. Rates are low, and the program makes it easier for folks whose equity has dropped significantly to refinance their loans without having to worry about paying private mortgage insurance.
So if you're looking for a quick overview of the refinance program and who qualifies for it, please head on over to our post from 2 days ago HERE. Otherwise, today I thought I'd expand on the previous post and do a Making Home Affordable Refinance FAQ to answer some of the most common questions. Tomorrow I'll write up a FAQ for the Making Home Affordable Loan Modification program. (Update: Modification Program Updated To Cover Second Mortgages)
Making Home Affordable Refinance FAQ
After reading through the various resources talking about this program online, here are some of the most common questions that I've seen. So let's jump right in!
- I'm current on my mortgage. Will there be any help for me in the Making Home Affordable program? Eligible borrowers (see the previous post about who is eligible) who are current on their mortgages but have been unable to take advantage of lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through the Home Affordable Refinance Program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities. This was good news for us because we are current on our mortgage, but our value has really dropped like a rock!
- How do I know if the refinance will improve the long term affordability or stability of my loan? The program won't necessarily help everyone, and you need to be sure of what you're getting into. Your lender will give you a “Good Faith Estimate” or GFE that includes your new interest rate, mortgage payment, closing fees and the amount you will pay over the life of the loan. Compare this to your current loan terms and you should be able to figure out if you're getting a good deal or not. If it is not an improvement, refinancing may not be right for you. You can also eliminate risk from your current situation by refinancing an ARM loan or Interest Only loan into a fixed rate mortgage, increasing the stability of your situation.
- I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program? Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $300,000 but you owe $315,000 or less on your first mortgage, you may qualify. The current value of your property will be determined after you apply to refinance.
- Will refinancing reduce the amount that I owe on my loan? Nope! The Home Affordable Refinance plan is meant to help borrowers get into loans that are more affordable. Refinancing won't reduce the principal amount you owe to your mortgage company, however, refinancing should save you money by reducing the amount of interest that you pay over the life of the loan.
- How do I apply for a Home Affordable Refinance? You should call your mortgage servicer and ask about the application process for the Home Affordable Refinance Program. Lenders and servicers are implementing the program now and it may take time before they are ready to process all applications. In fact, if you're calling right now, some lenders are still getting up to speed on the program – but it doesn't hurt to call and ask, some are further along than others. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call. Some of those documents include income documents, tax returns, information about any second mortgages, amounts due on credit cards, student loans and other debts.
- Will I need mortgage insurance? Maybe. If your existing loan has private mortgage insurance, you will need the same amount of insurance coverage for the refinanced loan. If your existing loan does not have private mortgage insurance it will not be required as part of the Home Affordable Refinance. This is good for us because it means we won't have to start paying PMI.
- How long will the Home Affordable Refinance be available? The program expires on June 10, 2010. You have to finish your refinance transaction on or before that date.
- I am delinquent on my mortgage. Will I qualify for a Home Affordable Refinance? No. You can't have been delinquent or have been 30 days overdue more than once during the past 12 months or you will not qualify. You should contact your servicer to see if a Home Affordable Modification is an option in your circumstance.
- Can I get cash out to pay other debts? No you can't. However, if your loan is owned or securitized by Fannie Mae you might be eligible to finance all closing costs and obtain a small amount of cash (2% of the mortgage amount not to exceed $2,000) through the refinance if there is sufficient equity. I wouldn't suggest it though.
So there are the answer to some of the most common questions about the Making Home Affordable Refinance Program.
In our next post I'll examine the refinance program's sister program, the Making Home Affordable Loan Modification Program. We'll take a look at some of the most commonly asked questions for that program, and supply the answers to the ones we can. Look for it!
Do you have more questions about the Making Home Affordable Refinance Program? Ask us in the comments and hopefully I or another commenter will be able to find the answer!