Certain lenders and programs allow you to refinance if you’ve had a late mortgage payment. But you may have to do some searching.

Question: Is there any way to refinance if we had a late payment on our mortgage six months ago? So far no one will approve us until a year has gone by with no late payments. We are drowning with a 6.75 percent interest rate.

–Anna

Answer: First, you’ll need to determine what kind of loan you currently have.

If your current loan is an FHA loan then an FHA streamline refinance may enable you to refinance. An FHA streamline allows for one late payment in the last 12 months, as long as it was more than three months ago.

What if I have a VA loan?

If your current loan is a VA loan, you may be eligible for a VA streamline refinance. VA streamline loans do allow for recent late payments.

Keep in mind that with all of these loan types, lenders can impose their own rules above and beyond what the FHA or VA require. That’s probably the reason you’re experiencing resistance from the lenders you are applying with. Keep looking, and you may find a lender that sticks to the base requirements and who may approve you for the loan.

The post Can I Refinance If I’ve Had a Late Mortgage Payment? first appeared on My Mortgage Insider.

It’s worth mentioning that the seller is limiting his or her buyer pool significantly by not being open to make repairs. Unless the buyer pays cash, there will probably be issues getting any kind of financing if the property deficiencies are major.

But because sellers often don’t want to put another penny into the home, here are some options on how to handle the situation.

Check your FHA eligibility (Sep 16th, 2024)

What is an FHA inspection?

Before a mortgage lender will finalize the FHA loan, they want to be sure that the home is worth what the borrower is paying for it. A HUD-approved property appraiser will evaluate the safety, integrity, and value of the property, and report it on an FHA form.

FHA Inspection Checklist

Here’s an overview of what the FHA appraiser considers when evaluating the home:

• Structure: Is the structure of the home in good condition? Is there dampness, decay or termite damage that might compromise the building integrity?
• Roofing: Is the roof likely to last two to three years? Does it keep moisture out?
• Heater, water and electric: Does each inhabitable room have an adequate heating source? (Regulations for this may vary depending on the severity of the local winters.) Does the water heater meet local building codes? Electric boxes should not be damaged or have exposed wides.
• Safety issues: The FHA appraiser will check for potential hazards, such as asbestos or contaminated soil.
• Location: The home must not be too close to a hazardous waste site. Also, proximity to excessive noise — like heavy traffic, high-voltage power lines or an airport — can prevent a home from meeting FHA guidelines.

For more information on the FHA minimum guidelines, see the Federal Housing Administration’s complete guide here.

The FHA appraiser or underwriter decides whether the property passes inspection

Appraisers approved to appraise for FHA financing know the FHA MPS requirements. When they see something that doesn’t meet FHA guidelines, they note it in the FHA appraisal. Until the issue is resolved, the lender won’t issue final approval for the loan.

But sometimes, the FHA underwriter — who verifies compliance with FHA standards for the lender — will notice something in the appraisal pictures and call for it to be fixed. Examples are peeling paint or a questionable roof.

Either way, someone has to fix the issues or there will be no FHA loan.

What if a house doesn’t meet the FHA Minimum Property Requirements?

To secure FHA financing for the property, someone will need to make repairs to the home. This could be the seller, the buyer, or occasionally the real estate agent. Without repairs, you may need to consider alternative financing options.

Option #1: The seller can make repairs

Even if the seller has said they won’t make repairs, they will sometimes come around if the necessary repairs are inexpensive or if they can do it themselves.

For instance, if chipping paint is the issue, the seller shouldn’t have any problem scraping the affected area and spending $50 on paint. It’s cheap and easy.

Give the real estate agents a copy of the home appraisal so they can see the issues first hand. The listing agent might be able to convince the seller to make repairs to meet FHA requirements in the interest of closing.

Click here to see if you're eligible for FHA financing (Sep 16th, 2024)

Option #2: The real estate agents make repairs

The real estate agents have a lot to lose if the transaction doesn’t close — often 3% of the purchase price. For this reason, it sometimes happens that agents come together to spend a few hundred or even a few thousand dollars to make sure the property meets FHA requirements.

This is rare and a risk for the agents since there is still a possibility that the loan won’t close.

In other words, don’t bank on the agents paying to make repairs, but it can happen.

Option #3: You make the repairs

Again, this is not an ideal way to handle the problem. You could spend a lot of money and effort, then the sale could fall through.

But buyers do sometimes pay for minor repairs just to get the house eligible for financing, and it has worked. Just take caution with this approach.

If you as the buyer are a licensed contractor, you may even be able to do some repairs yourself. It goes without saying you need to clear it with both agents and the seller before you try to gain access to the home or make any repairs to the home.

When the seller is a bank

When buying a foreclosure or real estate-owned (REO) home, the seller is often a bank that will not make repairs or grant access to the home so someone else can make them.

In this case, there is often no way to make repairs. In this case, an FHA mortgage may simply not be an option and you’ll have to consider other loan types. For example, a 5% down conforming conventional loan has less stringent property requirements than FHA. But if the property has major issues, it’s likely the mortgage lender will still require repairs.

Also, check whether the property is eligible for HomePath financing (which it’s probably not or you would know by now). In any case, HomePath loans don’t require an appraisal or repairs to be made at all! (Editor’s note: Fannie Mae ended their HomePath program on October 6, 2014. For more details, visit our Fannie Mae HomePath page.)

Check your home buying eligibility. Start here (Sep 16th, 2024)

Repair escrow

Some lenders will allow what’s called a repair escrow. Here’s how it works.

• The lender gets a licensed contractor’s bid for all the needed work.
• The lender adds the money for repairs plus any overruns into your closing costs.
• The lender will put that money in an escrow account to pay the contractor for the repair work after closing.

This option means the home is repaired to the lender’s satisfaction, and no work needs to be done prior to closing. But, keep in mind that not all lenders will do a loan with a repair escrow, and repair costs usually can’t go much above $1,000.

Check your eligibility for repair escrow here (Sep 16th, 2024)

FHA 203k loan: Buy & repair a home with one loan

Hands down, the best program to buy a home and make repairs is the FHA 203k loan. You get bids for the repair work and the repairs are made after closing. What’s best is that you end up with one FHA loan with a low mortgage rate.

An FHA 203k loan even allows borrowers to make cosmetic fixes to the home while bringing the home up to FHA minimum standards. This loan program allows up to about $31,000 in repair work with this great loan program.

Check FHA 203k rates and see if you qualify (Sep 16th, 2024)

If there are no solutions

If you’ve attempted all the above solutions and nothing has worked, it may be time to look at other homes. You can most likely withdraw your agreement to buy the home. Purchase agreements typically allow for the buyer to back out due to property deficiencies without losing their earnest money.

The FHA minimum property standards are there for a reason: to keep you from buying a lemon. The Federal Housing Administration’s FHA loan program was created to provide safe and long-term housing for home buyers and the appraisal FHA process is designed to make sure the value of the home is consistent with the loan amounts — and not a house you will regret buying later.

Check FHA rates and find out if you qualify for a 3.5% down FHA loan (Sep 16th, 2024)

The post What if the home does not meet FHA Minimum Property Standards (MPS) and selling as-is? first appeared on My Mortgage Insider.

-Dave

A: Hi Dave. Thanks for the question. First, let’s start with the main difference between the FHA and conventional loan programs.

Click here to check today's interest rates (Sep 16th, 2024)

What is the difference between an FHA and conventional loan in cost and benefits?

For home buyers with limited funds for a down payment, both FHA and conventional loans are available to help facilitate the purchase of a new dwelling.

FHA loans are insured by the U.S. Federal Housing Administration and are offered by FHA-approved lenders.

Conventional loans are not government-insured and are available through many banks, credit unions, and other mortgage lenders.

You may qualify for both, but there are real differences between them, so take the time to understand the advantages and disadvantages of each before making a decision.

Click here to see how much home you can afford now (Sep 16th, 2024)

What is a Conventional 97 loan?

Most people have been told that they can’t get a conventional mortgage with less than 10% — or even 20% — to use as a down payment, but that’s not true.

The Conventional 97 mortgage program allows you to put down as little as 3% for a down payment and then borrow the remaining 97%. The 3% can be sourced from savings, grants, Community Seconds mortgages, and even gift funds. The goal of the Conventional 97 loan program is to help people make their home ownership dreams come true, even if they don’t have lots of cash on hand. Conventional 97 loans require Private Mortgage Insurance (see details below).

Here’s what you need to know about Conventional 97 loans:

• You can get a Conventional 97 loan with as little as 3% of the purchase price of a home.
• You must be a first-time home buyer, though you qualify for this as long as you haven’t owned real estate property in the last three years.
• You can qualify for a Conventional 97 loan with a credit score that’s as low as 620. There are limits to the value of the property for which a Conventional 97 loan can be used. This is based on the conforming limit for the county where the home is located.
• You must take out a 30-year fixed-rate mortgage.
• The property must be owner-occupied.
• The property can be a single-unit family home, co-op, condominium or a unit within a planned unit development.
• You will be required to purchase private mortgage insurance (PMI) and continue paying premiums until you have 78% equity in your loan.

Click here to verify your home buying eligibility (Sep 16th, 2024)

What is an FHA loan?

FHA loans are insured by the Federal Housing Authority. These government-backed loans have been available since the mid-1930s for the purpose of helping first-time home buyers with little available cash and lower credit scores to qualify for a mortgage.

Down payments can be as little as 3.5%, and mortgage lenders (who must meet strict requirements and are limited in the closing costs they impose) are more likely to offer attractive terms because the loans are guaranteed by the government.

Your down payment can be sourced from savings or investments, grants, gifts, and employer programs.

The goal of the FHA loan program is to help people who would not typically qualify for mortgages to become homeowners.

Here’s what you need to know about FHA loans:

• You can get an FHA loan with as little as 3.5% of the purchase price if your credit score is at least 580.
• FHA loans do not require you to be a first-time home buyer.
• FHA loans have limited closing costs.
• Borrowers with credit scores between 500 and 579 are also eligible for an FHA loan, though these loans require a 10% down payment.
• FHA loans are subject to maximum amounts determined by type of home and location of the home.
• FHA loans require additional pre-purchase home inspections.
• The property must be the borrower’s primary residence and can be a single-unit family home, co-op, condominium or within a planned unit development.
• You will be required to pay an upfront mortgage insurance premium (UPMIP) of 1.75% of your base loan amount, which must be either paid entirely in cash or financed into the loan. Following this payment, you will continue paying annual Mortgage Insurance Premiums (MIP) for the life of the loan.
• Borrowers must have a debt-to-income ratio of less than 45%.
• You must be employed and have an income history of at least two years.
• FHA loans are assumable.

What are the dollars and cents differences between FHA and Conventional 97?

If all things were equal, this would be a simple question. However, there are so many potential variables, including your homebuying circumstances and goals, that the answer is complicated.

If your primary cost concern is about how much you’re going to pay out of pocket to get yourself into a home, and you’ve got a solid credit score, then the Conventional 97 is the way to go. Not only are you able to put down as little as 3% (compared to the FHA’s 3.5%), but you also won’t be required to pay 1.75% for the upfront mortgage insurance premium and there’s a good chance your private mortgage insurance is going to cost less too.

Plus, there’s the additional benefit of having your Private Mortgage Insurance automatically canceling once your loan-to-value ratio reaches 78%.

But things take a quick turn if your credit score falls below 620.

Click here to get pre-qualified to buy a home today (Sep 16th, 2024)

When is an FHA loan the right choice?

At first glance, the Conventional 97 loan seems like the clear winner for borrowers with sparse cash to spare. But that’s only when all things are equal.

Once you introduce a lower credit score, all of the variables start to change. Here’s why: The lower your credit score, the higher your interest rate is likely to be for a conventional loan. Once your credit score falls below 620, you no longer qualify for the Conventional 97 loan.

Private mortgage insurance generally costs more than FHA mortgage insurance payments for borrowers with credit scores under 720.

All of this means that if your credit has been negatively impacted, the FHA loan may not only be your better option from the standpoint of your interest rate, it may also be the only one of the two options for which you are eligible.

The hidden benefit of an FHA loan

Whether you’re purchasing a starter home or your dream home, smart buyers will look to the future and whether a property has resale value. That’s where FHA loans offer a hidden benefit not available with conventional loans: the ability for the next buyer to assume the existing FHA mortgage.

As long as a home buyer qualifies for the existing terms of an FHA mortgage, they are able to assume the existing loan and its original interest rate. That means that as interest rates increase, your FHA loan makes your home a much more attractive option. Conventional loans do not provide this benefit.

And if you’re worried abotu FHA lifetime mortgage insurance, keep in mind that you can refinance out of FHA to cancel MI as long as mortgage rates stay at or near current levels. If rates rise too much, a refinance would increase your rate, negating your savings.

Click here to check today’s FHA or Conventional 97 rates (Sep 16th, 2024)

Is there a difference in what kind of home you can buy?

FHA and conventional 97 loans limit the amount of money you can borrow, though these limits are determined by different factors and sources.

The FHA sets its limits based on the county in which the home being purchased is located, while conventional loan limits are subject to the conforming loan limit set each year by the Federal Housing Finance Agency.

Additionally, the FHA requires an additional appraisal for homes being purchased using an FHA loan. Though this may feel like an added layer of bureaucracy, the agency’s higher standards are based on adherence to local code restrictions, as well as ensuring the safety and soundness of construction.

FHA loans are not available for homes being sold within 90 days of a prior sale.

Finding the right low down payment mortgage solution for you

With so many factors potentially affecting your personal situation, and so many advantages to each type of loan, choosing the right option can be a challenge.

The good news is that there are plenty of loan professionals who are eager to help you find the solution that’s tailor-made to your needs.

Click here to get a pre-approval now (Sep 16th, 2024)

The post FHA vs Conventional Loan: Which Is Better? first appeared on My Mortgage Insider.

For instance, what if you’ve gone through a divorce since you purchased your home? Or, you bought a home with a friend or relative who now wants to be removed from the loan. Worse yet, what if your spouse passed away recently?

The short answer is yes, you can remove a borrower from your current FHA loan while refinancing with an FHA streamline. However, you’ll need to meet some guidelines to make it happen.

Check your FHA streamline refinance eligibility today (Sep 16th, 2024)

Removing a borrower with an FHA Streamline Refinance

If you have a loan backed by the Federal Housing Administration, there are two FHA streamline refinance options: those that require re-qualification of income, and those that do not.

A standard FHA streamline refinance in which no borrowers are removed does not require the applicant to prove current income to get a new loan. This type of refinance might not even require a credit check! However, that’s not always the case when a borrower is removed.

But if you’re planning to remove another homeowner from the loan, there can be a few more steps involved.

There is a cost associated with an FHA streamline refinance. You’ll need to pay closing costs on the loan amount. But you won’t necessarily need to pay them upfront. You may be able to roll them into your mortgage — and if rates have dropped since you bought your home, it’s likely the net tangible benefit will offset this cost anyway.

And an FHA streamline refinance won’t allow you to liquidate any of the equity in the home. For that, you’ll need a cash-out refinance.

Situations in which income re-qualification is required

The household income can change when a borrower is removed and your mortgage lender will want to know that you’re still able to repay the loan balance. The remaining borrower must re-qualify if he or she has not made payments alone on the current mortgage for at least six months. More specific circumstances that require income re-qualification for a mortgage refinance are as follows:

• When removal of the borrower is considered a home sale. Some mortgage lenders require mortgage notes that state if a borrower is removed, the loan must be paid off. In this case, the remaining borrower must prove income.
• When the removal of the borrower is not related to divorce, legal separation, or death.
• You assumed the FHA loan less than six months ago.
• You otherwise acquired the home and FHA loan less than six months ago, but it was not considered a sale. This happens in cases of divorce or the death of a co-borrower.

In these cases, removing a borrower from the loan and title are allowed, but the remaining borrower must prove they can still afford the payment.

Apply for your FHA streamline refinance here (Sep 16th, 2024)

No income verification borrower removal

You can remove a borrower without submitting income documentation to re-qualify. In general, you must remove the borrower from the title and show your payment history to prove you have made at least six monthly payments from your own funds, without the help of the removed borrower.

• You assumed the home and FHA loan more than six months ago and can document you made all the monthly mortgage payments from your own funds.
• Your co-borrower was removed from title due to divorce, legal separation, or death.
• You can document the situation with a divorce decree or similar document legally awarding the remaining borrower with the home and responsibility for the payment.

If you make at least six mortgage payments on your own, you will have an easier qualification process when removing a co-borrower with the FHA streamline refinance.

Advantages of an FHA Streamline Refinance

If you have an FHA loan, an FHA streamline is the quickest way to take advantage of today’s low rates. Even if you recently removed a borrower from the title, it’s still very possible you will qualify for a lower interest rate and payment with a new mortgage.

Check your FHA streamline refinance eligibility today (Sep 16th, 2024)

The post Can I Use an FHA Refinance to Remove a Borrower? first appeared on My Mortgage Insider.

Buying again after a foreclosure, short sale, or deed-in-lieu of foreclosure can be done, with some hard work — and waiting.

Mortgage lenders don’t like to see a foreclosure on your credit report. But, there may be some hope if you’ve demonstrated a rehabilitated life situation and have had perfect credit since the foreclosure.

Check your home buying eligibility. Start here (Sep 16th, 2024)

How to buy a home after a foreclosure

The lender is looking for proof the circumstances that caused the foreclosure are well behind you and are not likely to be repeated. For example, if you had a medical emergency, incurred high hospital bills and missed work, but you are now recovered, then there’s a good chance you could be approved as a home buyer. But, if you had gambling problems and you’re still regularly visiting the casino, you won’t be approved.

In general, underwriters are looking to confirm:

• You had great credit before the foreclosure
• You have had great credit since the foreclosure
• The foreclosure was caused by a one-time event
• You are now recovered or have made fundamental changes in your life since the event that caused the foreclosure

What is an extenuating circumstance?

A few loan types allow shorter waiting periods for “extenuating circumstances.” In simple terms, it’s a situation that was beyond your control. A medical emergency or death of the wage earner are examples of potential extenuating circumstances. A divorce, a drop in equity, or inability to sell your home would not be approved extenuating circumstances — while, those are tough situations, they’re not considered “beyond your control.”

The loan underwriter will evaluate your situation and make a judgment call. Basically, he or she needs to build a case that your foreclosure was due to an event that had nothing to do with your lifestyle or choices, and despite your best efforts, you lost the home.

Conventional loan foreclosure waiting periods

There’s a seven-year waiting period after a foreclosure with a conventional conforming loan for both Fannie Mae or Freddie Mac-backed loans.

Both allow for a lesser waiting period with applicable, documented extenuating circumstances, though. In that case, there’s a minimum three-year waiting period and a 10% down payment required before the borrower is eligible for a new mortgage.

Keep in mind that if you’re putting less than 20% down, you’ll be required to get private mortgage insurance (PMI). Check with your lender early in the process on how the PMI company views foreclosures. In many cases, PMI companies impose stricter standards than Fannie Mae or Freddie Mac.

Check your home buying eligibility. Start here (Sep 16th, 2024)

FHA loan foreclosure waiting periods

There’s a three-year waiting period after foreclosure for FHA loans.

The FHA loan program does allow for documented extenuating circumstances, though it doesn’t specify an exact time frame. That said, you should expect it to be at least one year. The guidelines require that “the borrower has re-established good credit since the foreclosure” before they seek a new FHA mortgage.

For bankruptcy, the Federal Housing Administration requires no less than 12 months, and you can anticipate a similar minimum time frame for foreclosures.

Potential extenuating circumstances are a “serious illness or death of a wage earner” but the “inability to sell the property due to a job transfer or relocation” does not. Divorce is also not considered an extenuating circumstance unless the property was awarded to your spouse who defaulted on the loan after you no longer owned it.

VA loan foreclosure waiting periods

The waiting period after a foreclosure is two years for a VA loan with proof of re-established credit.

Similar to FHA loans, extenuating circumstances are allowed for reasons “beyond the control” of the borrower if properly documented. The VA treats foreclosures similar to bankruptcies as well — at least one year of good credit is required for a VA loan eligibility.

If your foreclosed mortgage was a VA loan, you may not have any additional VA entitlement left. Entitlement will not be restored if your original VA loan was not repaid in full.

USDA loan foreclosure waiting periods

For USDA loans, the waiting period after a foreclosure is three years.

It does allow for extenuating circumstances like the other loan types, what it refers to as a “temporary situation.” The circumstances need to be “temporary in nature, beyond the applicant’s control, and the circumstances have been removed and resolved for the 12 months prior to application.”

You may also have a shorter waiting period if the new loan will significantly reduce your housing expenses, which will help improve your ability to make your mortgage payments. The USDA considers a qualifying reduction to be 50 percent or more.

Check your USDA home buying eligibility here (Sep 16th, 2024)

Waiting periods after foreclosure summary table

What is CAIVRS for government-backed loans?

The Credit Alert Verification Reporting System (CAIVRS) is the federal government’s database to track individuals who have defaulted on federal financial obligations — like defaulting on a student loan or foreclosing on a home with a government-backed loan.

You will not be able to access the CAIVRS list yourself, but your lender can and will check before approving your loan. If you’re applying for an FHA, VA, or USDA loan and you’re on the CAIVRS list, then you will not be approved for the loan.

Delinquencies like student loan debt will stay on the CAIVRS list until it’s resolved in full, but if you’ve foreclosed on a government-backed loan, then you’ll have to wait three years before being removed from the list.

Six government agencies report to CAIVRS — the Department of Housing and Urban Development, Department of Veterans Affairs, Department of Education, Department of Agriculture, Small Business Administration, and the Department of Justice. If you defaulted on debts to any of these departments, then more than likely you’ll be on the CAIVRS list.

Waiting periods after short sales & deed-in-lieu foreclosures

For some loan types, the waiting period after short sales and deed-in-lieu of foreclosures are different than a traditional foreclosure. Most offer shorter waiting periods with approved, documented extenuating circumstances.

*The waiting periods provided are for deed-in-lieu foreclosures. The VA does not offer specific waiting periods for short sales.

**Short sales on a principal residence to take advantage of declining market conditions are not eligible for a USDA mortgage loan.

A final note to buyers

While the above waiting periods and restrictions are detailed in the specific loan guides, each lender can make additional rules and may require longer waiting periods. The good news is that it is possible to buy again after a foreclosure, but it will take some time.

Check your home buying eligibility. Start here (Sep 16th, 2024)

The post How Long After a Foreclosure Can I Buy a Home? first appeared on My Mortgage Insider.

Q: I’m pre-qualified for a mortgage, but I haven’t found a home yet. Should I be concerned if interest rates are rising?

A: It’s true that increasing rates can diminish your buying power. A higher rate means either a higher monthly payment or a lower loan amount for which you can qualify.

Check your home buying eligibility. Start here (Sep 16th, 2024)

To add to the stress, interest rates change throughout each business day because they are pinned to active markets. Mortgage interest rates are much like the stock market in that way.

While it can pay to watch rates, it can be counterproductive to watch them too closely before you have an accepted offer on a property. The last thing you want to do is choose the wrong property because you want the perfect rate. Buying the wrong home can be way more costly.

The best thing to do is find the right property that will suit you for years to come. Then, lock in your rate as early as possible, even if you think the rate may go down.

Don’t get greedy. Mortgage experts spend their lives trying to predict rates, and even they are blindsided by interest rate swings. Once you’re locked in, you can kick back, relax, and have peace of mind knowing you got a great rate.

But, make sure your lock expiration is at least a week or two after you think you are going to close. In today’s lending environment, a number of things can happen along the way to delay your closing.

Even if you’re a golden mortgage applicant, the seller of the home you are buying may not be so golden, and be delayed in moving out. You don’t want to lose your locked rate because you didn’t leave room for delays.

Check your home buying eligibility. Start here (Sep 16th, 2024)

The post I’m Pre-Approved. Should I Worry about Rates? first appeared on My Mortgage Insider.

-Anonymous

A: If you are delinquent on the mortgage you have now, there are not a lot of options to buy a different home. Lenders won’t take a risk on someone who is already late on their payments elsewhere. They see that as a really good indication that mortgage delinquency will happen again.

Creditors view your past as a guide to how you may behave in the future. Mortgage delinquency says that you don’t make enough money, are irresponsible, or otherwise got in a financial situation that’s now not manageable. Whether or not these are actually true about you is irrelevent to a lender. To them, the fact that you are now late on your mortgage sounds warning alarms that keep you from being approved for a new loan.

Regarding selling your current home, I’m guessing you’re underwater. This would make the home hard to sell. You might want to would check out the government site, MakingHomeAffordable.gov, for options to reduce your payment and keep your home.

The best plan is to get your mortgage delinquency taken care of by paying funds that are in arrears. Then try to stick it out where you are until you can sell the home conventionally. Sometimes it just takes a lot of time and patience to overcome these obstacles.

The post I’m Delinquent on my Mortgage. Can I Buy another Home? first appeared on My Mortgage Insider.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

Q: If my mortgage is not owned by Freddie Mac or Fannie Mae, can I still get into the HARP program?

I got into my home before everything went south in the job and housing markets and received a rate higher than is offered with HARP. But my loan isn’t a Fannie Mae or Freddie Mac loan. It kind of sucks knowing that I’m probably paying $300 more a month than I would have to if I could use this program.

—Ed K.

A: You have a great question, Ed – one that thousands of homeowners across the country are asking. And I wish I could answer it differently than I have to. However the rules state that your loan has to be owned by either Fannnie Mae or Freddie Mac to be eligible for the Home Affordable Refinance Program, or HARP.

However, that’s not to say that HARP rules will never change. In fact, opening up the program to everyone is one of the big changes I’m hoping for in 2014.

Instant help: Get a HARP-alternative program rate quote and see if you’re eligible.

This change to the program would be called HARP 3.0.

A little HARP history: HARP 1.0 allowed underwater homes to refinance, but only if the loan balance was at 125% or less of the home’s value. Then HARP 2.0, the current program, was rolled out. HARP 2.0 does not have a limit to how underwater the home can be. But with HARP 2.0, it still has to be a Fannie or Freddie loan.

What many in the industry, including me, are hoping for in 2014, is that HARP 3.0 will be rolled out. This program would allow countless underwater homeowners who don’t have a Fannie or Freddie loan to refinance into today’s rates.

Millions of homeowners in the last decade used home loans that did not comply with Fannie or Freddie guidelines. Some examples of popular loans back then were:

• Alt-A loans
• Subprime loans
• Stated Income and stated asset loans
• Washington Mutual option ARMs
• Wachovia and World Savings option ARMs
• Countrywide PayOption ARMs
• NINJA loans (No income, no job or assets)
• Some types of interest-only loans

Just about everyone who used one of these loans ended up with sever negative equity, because most of these loan types did not require a payment to the principal loan amount. Then when home values crashed, many homeowners quickly found that they owed more than double what their home was worth.

Instant help: If you’re not sure if you’re eligible for a HARP-alternative, call a knowledgeable expert to find out.

But not all of these homeowners defaulted on their loans. To this day, many are paying their loans faithfully, in hopes of some help. I gather, Ed, that this is your situation, and I applaud your perseverance when so many have defaulted on their home loans during the housing crisis.

Is HARP 3.0 coming soon?

What I can say is that many in the industry are pushing for the Federal Housing Finance Agency, or FHFA, the agency that oversees Fannie and Freddie, to change HARP and allow faithful homeowners like you to take advantage of the same benefits that Fannie and Freddie loan holders have enjoyed.

There are many feasible ways to make this happen, as I discuss in my article “Here’s How We Can Make HARP 3.0 Happen in 2014.” One real option is to roll out HARP 3.0 changes slowly, which could result in a program called HARP 2.1 or HARP 2.5.

However it might happen, I welcome any positive changes to the program so we can see HARP 3.0 become a reality before rates rise too much. I want to see people who opted for less-than-ideal loan terms upwards of 10 years ago finally see some mortgage relief, start building equity, and get into long term loan types. People like you, Ed, deserve an affordable home for years to come.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

The post Can I Refinance with HARP if My Mortgage is not a Freddie or Fannie Loan? first appeared on My Mortgage Insider.

However, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

A HARP refinance is just one option. There are other ways to get help with your mortgage payments, but you might need to think outside the box.

Q: My wife and I are seriously upside down due to the economy. We paid $530,000 for our current home about 6 years ago right before the crash. Our home is now valued in the mid to upper 300,000’s. We are so upside down and I don’t see any relief anywhere.

We need to lower our mortgage payment badly. It is at $3,000 per month and our loan is not Fannie Mae or Freddie Mac so we DO NOT qualify for a HARP which is sooo disappointing in our situation. I will be retiring in less then 6 years and I have to have a better situation or we will have no choice but to walk away. I don’t see any other way at this point unless we can refinance at a lower rate that is more in line with today’s rates.

We have never missed a payment on our mortgage but we are seriously strapped and barely hang on all the time.

What are our options? There has to be something that can be done here and it doesn’t seem fair that we can’t be involved in a refinance with HARP just because of the type of loan. What do you suggest my friend?

–Bill

There are so many people in your situation right now. I think that’s why so many are calling for sweeping changes in HARP – often referred to as HARP 3.0. There is a bill in Congress now, but I would call it more like HARP 2.1 instead of HARP 3.0. This is because it reduces costs on HARP and would allow people to qualify without proving employment – but the program is still only available for loans owned by Fannie/Freddie (the GSEs). Also, it doesn’t look like this bill will pass.

Here are my suggestions at this point:

1. Contact your elected Representative and tell them that a sweeping bill needs to pass in Congress, allowing non-GSE loans to be eligible for HARP.

2. Explore MakingHomeAffordable.gov for programs you may qualify for. HARP is just one of the government programs available now. Here are a few examples:

• HAMP – This is a modification program that allows some to reduce their mortgage payments. Apply by contacting your servicer.
• UP – This program may allow you to suspends or reduces your monthly payment until you can find your next job.
• Hardest Hit Fund – This is special allocation to 18 states and the District of Columbia to assist homeowners who live in the areas hardest hit by the housing crisis. Your state may have special programs available. One example is a HARP 3.0-like program for Multnomah County, Oregon residents.

3. Call your existing servicer. Even if they don’t participate in any of these government programs, they may have modification programs of their own. Many servicers would rather reduce your principle or interest rate than deal with the foreclosure.

4. Rental markets are getting stronger. In the next 6 years before you retire, rent out the home at or close to your current mortgage payment. Once your payment is covered by the renter(s), you’re free to downsize your own housing payment.

5. If it’s a big home and you have extra space, think about remodeling part of the home into a mother in law unit. Then, rent out this portion of your home. If you don’t have money for the remodel, invite a (trusted and pre-screened) boarder to live in a spare room, family style.

6. Wait for values to come back, and sell or refinance at that time. Believe it or not, the housing market is on a rebound and many states are seeing double digit appreciation.

I know none of these are the quick-fix that HARP could offer. But, they are some ideas you can experiment with. With a little creativity and some luck, you may be able to get help with your mortgage payments even without HARP.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

The post I Need Lower Mortgage Payments but I’m not HARP Refinance Eligible first appeared on My Mortgage Insider.

However, Fannie Mae’s High LTV Refinance Option (HIRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

Refinancing when you have a second mortgage can be done; preparation helps.

How do I refinance a conventional loan I obtained with a mortgage instrument formally known as an 80/20 loan (80% first mortgage and 20% second mortgage)? We have tried to sell the home but have had no luck. We are underwater. We want to lower our monthly payment until the market allows us to swallow a loss or to break even.

— Odie from Texas

You’re in a very common predicament. Many bought a home with an 80/20, as it was a great way to buy a home with zero down. However, now it’s proving hard to refi one or both of the loans.

Your best bet is HARP. For a complete guide, see our HARP page.

The first step to HARP is to check if your current first mortgage is owned by Fannie or Freddie. If so, there’s a good  chance you can qualify for HARP. Check your loan at both of these sites:

• https://www.knowyouroptions.com/loanlookup
• https://www.freddiemac.com/corporate/

Your best strategy is to refinance the first mortgage and keep your 2nd mortgage open. Hopefully your 2nd mortgage has a small enough balance so that you can work toward paying it off instead of refinancing. There is no HARP-like refinance program for 2nd mortgages, and your total loan compared to the value of the home is probably way too high for any bank to approve the second mortgage refinance.

You’ll need to subordinate the 2nd mortgage under the new HARP refinance. Subordinating is basically getting a document from the current 2nd mortgage holder saying they agree to go back into 2nd position when the new 1st mortgage is complete. Your lender will take care of getting this for you.

Lately, second mortgage lenders have been pretty good about subordinating their loans behind underwater HARP refinances. When HARP first came out, second mortgage lenders often denied subordinations because the loan-to-value was too high.

If your loan is not Fannie- or Freddie-owned, this will be a hard refinance to complete. It would be completely up to the owner of the loan as to whether they will offer you a refinance option.

Hope this helps, and thanks for asking.

Check today's rates here and apply for a conventional refinance (Sep 16th, 2024)

The post How Do I Refinance with HARP when I have a 2nd Mortgage? first appeared on My Mortgage Insider.