Obama’s Home Affordable Plan – Loan Modification Or Refinance? How it Works For Your Situation

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President Obama’s sweeping stimulus plan is aimed at helping millions of Americans stay in their homes with help to either refinance or modify their current mortgages into affordable payments. The Home Affordable Planm, or HAMP, has several components, and depending on your situation, you may qualify for assistance using one of the federally subsidized options. Which one right for you?
The Home Affordable Modification Plan-HAMP- is designed for borrowers facing a financial hardship and unable to take advantage of the current low interest rates due to loss of equity or low credit scores. Under this plan, participating lenders will be paid to modify loans for qualified homeowners. The terms offered include interest rates reduced to 2%, loan terms extended to 40 years and principal deferral or forgiveness. If you have lost significant equity due to decreased home values and are not able tor refinance or sell your home, you could be eligible under this part of the plan.
The Home Affordable Refinance Plan-HARP- is designed to offer a new loan at current market rates for homeowners who are current on their mortgages, but who do not qualify for a standard refinance due to loss of equity. If your mortgage balance is 125% of the current value or less and you have not been more than 60 days late in the last 12 months, and your current loan is owned or serviced by Fannie or Freddie you may qualify under this plan.
The Hope for Homeowners refinance plan has been expanded to accept more borrowers-since it’s inception only 70 loans have been completed. However, the new guidelines will open the doors for more borrowers to qualify using this FHA insured refinance plan. The lender will be paid by the Treasury Department to refinance qualified borrowers into new government insured loans at market rates.
Each circumstance is different, and so you may be a candidate for one of these programs because of your unique situation. Many homeowners across the country have been hit with the perfect storm of loss of income, increasing mortgage payments and substantial loss of equity because of the housing market meltdown. Unfortunately, this means that there are few options for borrowers to get out of their financial hardship. The Treasury Department is really pushing banks to step in and offer these borrowers a solution so the high foreclosure rates can be decreased and give our economy a chance to get back on track.Since this is a federal program, there are standard approval guidelines that every borrower must meet. The secret to getting the help you need is to be informed and prepared before you contact your lender to apply. There is a standard 4 step formula that participating banks use to determine who qualifies-you can learn and use this very same formula to make certain your application has the best chance of approval. Take advantage of a software program that actually mimics the federal formula-all you do is put in your own income and expenses, and all the calculations are done for you. The Loan Mod Quick APP software calculates your debt ratio, disposable income, new interest rate and new target payment. These are all figured immediately for you. Use this information to make any necessary adjustments on your financial statement so that you have the best chance of approval.If you need help and are not sure how to begin, you can learn more about the programs by visiting the government website makinghomeaffordable.gov. Regardless of the program, you will have to complete an application and provide proof of your income. A word of caution-before contacting your lender make sure you are prepared and understand the basic approval criteria so that you can work on your application ahead of time. The information you provide will determine your eligibility-make sure you do not make a mistake that could cost you the help you need and deserve. Use the software program designed just for homeowners and you will avoid costly mistakes.You will be asked to submit a hardship letter describing your situation, and financial statement detailing your income and expenses, and proof of your household income. All of this will be reviewed to determine if the information you have provided fits into the federal formula. You can take a lot of the confusion and frustration out of the process by using a software program designed just for homeowners. Simply input your income and expenses and it calculates your debt ratio, new target payment, new loan terms, disposable income and everything else you need to know. Learn and prepare ahead of time-saving your home is worth the effort.

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