Making Home Affordable Refinancing Program
When home values fall, homeowners often struggle to refinance their mortgage loans. That's because most mortgage lenders require that they have at least 20 percent equity in their homes before they'll give their OK to a refinance. There is hope for homeowners with little to no equity, though; the federal government offers assistance and guidance in the Home Affordable Refinance Program.
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Underwater Homeowners
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The government launched the Home Affordable Refinance Program in 2009 as a way to provide relief to those homeowners who wanted to take advantage of lower mortgage interest rates, but because of falling home values couldn't qualify for a refinance. Under the government program, homeowners who owe as much as 125 percent of their home's value on their mortgage loans can qualify for a refinance. This means that homeowners with residences valued at $200,000 could qualify for refinancing even if they owed as much as $250,000 on their property. The government encourages lenders to accept such refinances by providing them financial incentives for every such refinance they complete.
Call Your Lender
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To apply for the Home Affordable Refinance Program, you'll have to call your existing mortgage lender. This is a big change from what happens in traditional refinances. In normal refinances, you can work with any lender that is licensed to do business in your state. You do not have to work with your existing mortgage lender. Under the government program, though, you will have to work only with your existing mortgage lender. If this lender refuses your request---lenders are not required to accept refinance requests even if they are participating in the program---you'll have to find a lender that is willing to approve you for a refinance without the financial incentives provided through the government program.
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Requirements
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To qualify for a refinance through this program, you will have to meet certain requirements put in place by the federal government. You must be refinancing to lower your monthly mortgage payment, and you must be refinancing a loan owned or guaranteed by Fannie Mae or Freddie Mac. You also cannot be behind in your mortgage payments, and you must not have sent in a home loan payment more than 30 days late in the past 12 months. Finally, you must be able to prove that you have the financial ability to cover your new monthly mortgage payments.
Financial Ability
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As in traditional refinances, your mortgage lender will want proof that you can afford your new mortgage payments. This means you'll have to provide your lender with copies of paperwork such as your most current federal income tax return, savings and checking account statements, recent credit card bills and last two paycheck stubs. Your lender will review these to make sure you have a stable income to afford your monthly mortgage payments after your lender completes the refinance.
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