Government Help With Mortgage Interest Rates
Mortgage payments are calculated using three primary figures. The loan amount, amortization term and interest rate all contribute to how much is owed each month on a mortgage. Refinancing to lower your interest rate is the best way to lower your mortgage payment. Unfortunately, the collapse of the real estate market caused many homeowners' values to plummet. They now find they cannot refinance into a lower interest rate loan because their homes value is less than their mortgage balance. Fortunately, the government created loan programs specifically designed to help homeowners in this situation.
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Streamline Refinance
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The Federal Housing Administration (FHA) provides streamline refinance programs for homeowners who currently have an FHA loan. This program allows homeowners to refinance their mortgages without the need of an appraisal. The main condition is the new loan amount cannot exceed the old loan's maximum loan amount. To qualify, you must currently have an FHA loan and made at least six payments. Acceptable payment history is required; if you have been more than 30 days late twice in the past 12 months you do not qualify. You may have one 30-day late payment as long as it was not in the past three months. Your new loan must provide a clear benefit, like a lower interest rate and payment reduction of at least 5 percent.
IRRRL
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Veterans Affairs (VA) offers a similar program to FHA's streamline refinance called the interest rate-reduction refinance loan (IRRRL). This program is only for eligible veterans and their spouses who currently have a VA loan. No appraisal is required as long as the new loan amount does not exceed the old loan's original balance. You may use any VA-approved lender, so VA highly recommends you obtain several quotes before signing an application.
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Making Home Affordable
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The Making Home Affordable Refinance program allows homeowners whose loans are owned by Fannie Mae or Freddie Mac to refinance their mortgages into lower interest rates, even if their new mortgage is up to 125 percent of their home's current value. You may apply for this loan program either through your current lender or from a new lender. This program requires you lower your interest rate or change the payment term into something more secure to qualify.
Other Options
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As of 2011, the government is helping people who need help with their loans interest rate but are unemployed. Unemployed homeowners in the hardest-hit states should call their state's housing authority or a local HUD-approved non-profit housing counseling agency. While the government cannot lower your interest rates, it is providing 0-percent and no-payment second mortgages to qualified people. These state and local agencies have received a share of $1 billion from the federal government to provide help to people until they can begin to pay for their mortgages again on their own.
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