REFINANCING PROGRAM

Obama Administration recently introduced the Home Affordable Refinance Program. It is being anticipated that with the introduction of the new program approximately 4 million to 5 million homeowners will be able to avail the refinancing program.

When do you qualify for the refinancing program?

• You are eligible for availing the program if the home you are residing is your primary residence.

• The amount you currently owe on the first mortgage is either the same or less than your property’s current value. The amount you owe can’t be 105% of present market value.

• To qualify it is also essential that in the last one year you haven’t fallen behind on mortgage payments for more than 30 days.

• Your loan is either backed by Freddie Mac or Fannie Mae.

• You should also be able to prove that you have a steady income and your financial condition allows you to make the new mortgage payments regularly.

When you don’t qualify for the program?

You fail to qualify for the refinancing program under the following circumstances.

• If you are a homeowner and you are delinquent already. However, you may qualify for the Home Affordable Modification Program.

• If it is an investor owned property, you don’t qualify for the program.

Your loan-to value ratio is important

In case the LTV or loan-to-value ratio is more than 80%, neither Freddie Mac nor Fannie Mae can refinance the mortgage unless there is some kind of credit insurance. Credit insurance is something that may not be available readily under the prevailing market conditions. Due to the financial crisis or credit crunch, not many insurers are willing to take on the risk.

Consumers who have purchased houses a couple of years ago with a loan period of 30 years and a fixed rate of interest of 6.5% or higher will not qualify for a refinance program as their loan-to value ratio is more than the limits set by either Freddie Mac or Fannie Mae. However, as per the new rules introduced by the Obama refinance program, consumers with higher LTVs are also eligible for the refinancing program.