Obama’s Refinance Plan - What it Means For Your Mortgage

Posted on July 8, 2009 - Filed Under Real Estate |

A perfect storm for home buyers that brings with it a large decline in home values denying many homeowners the right to refinance to a lower rate. All around the United States millions of homeowners are underwater on their homes and can not refinance. Obama's new plan, Homeowner Affordability and Stability Plan (HASP), brings with it a beacon of hope for struggling homeowners that are trying to make ends meet.

Take for example a couple who bought there home a few years ago during the housing boom. They paid $400,000 for their lovely 4 bedroom home. They put down $40,000 dollars or 10% and financed the rest. On their $360,000 loan they got a rate of 6.50% which is fixed for 30 years. Now fast forwarding to today we see interest rates on mortgages at really low levels. This couple could be eligible for a rate of 5.25% for a 30 year fix, however their home which was valued at $400,000, when they first bought it, is now valued at $340,000. I know a lot of people that are reading this article can relate to this shear drop in home price. As of today, the couple has paid $10,000 towards the principle loan balance leaving them with $350,000 left on their loan. The couple can not refinance because there loan amount is greater than the value of their home. The only option for the couple would be to pay a considerable amount of money towards their loan balance to bring down the Loan-To-Value Ratio to meet the underwriting guidelines. However, just like many people around the country, the couple does not have the spare change in their bank account to pay for this refinance. Millions of people around the country are facing similar situations and many are worse off due to job loss. Being able to refinance into a lower rate would drastically help many Americans make ends meet.

Luckily, the <a target=”_new” rel=”nofollow” href=”http://refipost.com/2009/06/25/obama%E2%80%99s-refinance-plan-what-it-means-for-your-mortgage/”>Obama Refinance plan allows the borrowers to refinance their home for a lower interest rate. Under the new plan, homeowners will be able to refinance up to 105% of their home value. In this example, the couple owes $350,000 which is less than 105% of their $340,000 home. The couple will be able to discuss lower rates with lenders and save over $500 a month. The plan is effective as of now and homeowners have until June 2010 to get in on this plan. The guidelines for the plan are that homeowners must be in good standing and their mortgage must be owned by either Fannie Mae or Freddie Mac.

Leo Blair has been in the mortgage profession for over 20 years. For more Refi and mortgage Tips please visit http://www.refipost.com

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