The nation’s housing market is making a comeback. Property values are on the rise and have been for a while.
Despite the market’s continuing recovery, it may not be happening fast enough for some homeowners. According to CNBC, 5.9 million Americans still owe more on their homes than their property is worth. This can be problematic because these homeowners struggle to refinance at a lower interest rate or to lower their monthly payment due to a lack of equity.
Fear not. There are solutions out there for you. A number of existing loan programs contain options for homeowners who may have previously found it difficult to refinance.
The Home Affordable Refinance Program (HARP) allows eligible homeowners to refinance up to 200% of their home’s value. As an example, you could refinance up to $150,000 worth of mortgage debt even if your home is only worth $75,000.
The program runs until December 31, 2018, but there are certain qualifications you have to meet before refinancing with HARP:
- The mortgage must be owned by Fannie Mae or Freddie Mac.
- The mortgage must have been sold to Fannie Mae or Freddie Mac before May 31, 2009.
- The ratio of the amount owed on your home and its current market value – also known as your loan-to-value ratio, or LTV – must be between 80% and 200%.
- You need to be current on your mortgage payments. Current means having only one late payment in the past 12 months and none in the past six before refinancing.
- For most people, HARP is a one-shot deal. The exception to this is if you refinanced a Fannie Mae loan under HARP between March and May 2009. These clients may be able to take advantage of the program again.
Check out our HARP eligibility tool to see if you qualify.
Even if you don’t qualify for HARP, you still might benefit from a similar Streamline program from Fannie or Freddie.
If you’re in an FHA loan, refinancing with a Streamline might be another good option to consider. A Streamline offers the opportunity to lower your rate or change your term without the need for as much documentation as a typical refinance. In many areas of the country, no appraisal is required.
Most importantly for you, a Streamline may allow you to refinance even if you currently owe more on your home than it’s worth. And as a bonus, with a Streamline, you qualify for low mortgage insurance rates.
If you’re a qualified active-duty service member, retired veteran or surviving spouse, the VA offers its own version of a Streamline in the form of an Interest Rate Reduction Refinance Loan (IRRRL).
Qualified clients can refinance with a loan-to-value ratio of up to 120%. For example, you could refinance if your home was worth $100,000 and you owed $120,000 on the mortgage.
If you don’t qualify for any of these programs and you’re seeking relief, talk to your servicer. You may qualify to do a loan modification in order to lower your payment. This can take one of a few forms:
- Temporary interest rate reduction
- Principle forgiveness
- Partial or deferred payments
- A longer term (which results in lower payments)
A loan modification will show up on your credit report, and as a result, your score can take a hit. However, if you’re responsible, there’s no reason to think that your score can’t reach its previous level after a time.
If you owe more on your home than it’s worth, you definitely have some options available to you. If you’d like to talk to one of our Home Loan Experts about your situation, you can get started online or call (888) 728-4702.
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