Yes, it’s true. Due to the economy and the general decrease in income in the American household, the feds have a program that can cut your mortgage rate to 2% in order to make your payment 31% of your gross income. However, it seems that qualifying for this program will take some pretty fancy maneuvering. Here are some tips to give you a general idea if you can qualify, and what to do to get the loan to the closed and funded status.
The program that I am speaking of is the Making Home Affordable program. This program only applies to the mortgages held by Freddie Mac and Fannie Mae. These are the giant mortgage holders that were taken over by the government about one year ago. They are cutting rates on mortgages to as low as 2% in an attempt to get the payment at or below 31 % of borrowers gross income.
First, you need to know if one of these two agencies owns your mortgage. Even if you got your home loan at a bank, it may be owned by one of these lenders now. These two large companies buy loans from commercial banks; they own a major portion of the nation’s home loans.
To find out if Freddie or Fannie owns your mortgage, you will need to visit both the lenders web sites and fill in the requested information about your residence and yourself. Remember, you may not know if either of the two agencies owns your loan. The bank that you received the loan from may still be servicing the loan even though Freddie or Fannie may own the loan. So you need to check no matter what you think. If they don’t own your mortgage, well, you don’t qualify.
To estimate if you qualify, figure the amount of your mortgage payment (including principle, interest, taxes and insurance) and figure what percentage this amount is of your gross income. There are two reasons you know that you have and excellent chance to qualify.
You may have taken out an adjustable rate mortgage that has skyrocketed in interest and the payment has gotten almost twice what it was in the beginning. The second would be that one of the two of you as income earners has either lost their job or has had hours worked cut back considerably.
There is a trick to qualifying, you have to convince the bank that your are in dire straights but with the help of the mortgage payment reduction, you will be stable financially. You will not qualify with a large savings account, this is the biggest dis qualifier. You cannot spend 45% of your income on private schools or golf club dues.
You cannot be in to bad of position ether, for example, you won’t qualify on unemployment income that is considered a 6 month income, and the requirement of employment is a strong chance of continued employment for 9 months or more.
You get the picture, the window for qualification is small, and one Lender stated “it would not hurt to go delinquent by 1 or 2 months, I feel terrible saying that but that will get the banks attention”.
There is help on the inter net to see if your qualify, contact HUD, or another non-profit, Homeowner’s toolbox who claim they can estimate the probability of approval for you.
It’s a great time to be shopping for a house with exceptional mortgage loan rates available from reputable credit unions. For extra financial security, have a look at fixed GIC rate products.
Mortgage Rate FAQ:
Question: For a 100k home loan, would you pick Wells Fargo or Bank of America? Considering Mortgage Rates, Closing Costs, etc.
Answer: Wells Fargo for sure, they are wonderful to work with and easier to get a loan through them.
Question: New mortgage applications had their lowest week since 1997?
Sounds like not even the 8,000 dollar tax credit and 5% interest rates are making a difference? Have we hit bottom in real estate?
Answer: The housing business will probably be one of the last parts of the economy to return to normal. I wouldn’t expect it for another 2-3 years, regardless of what happens now. There is no easy way for a working class with no capital to save up the down payments now that savings accounts are running dry.
Question: What are my mortgage options?
I have a mortgage that has a ridiculous interest rate. The amount I owe on the loan is MORE than what my house is worth now, and I have no idea what I can do because I am having trouble making payments. Do I have any options at all? I’ve been turned down for refinancing numerous times, including one from the VA.
Answer: Depending on the type of loan you have now, you may be eligible for one of the mortgage relief programs designed to lower rates on homes that are worth less than the amount owed. eg. Hope for Homeowners, HARP, etc.
Otherwise many people in your situation are walking away from the mortgages. I don’t recommend it. Many borrowers were tricked into accepting ARMs for mortgages. Sure, they could afford the payments in the first 2-3 years, but not a chance after that. Everyone was betting against the market – they lost. Borrowers, lenders, investors.
I would offer my lender an option. Refinance my balance to a 30 yr fixed at 6%, or I’ll walk away. If you don’t have the money, what’s the difference?
Question: Where can I get a £75,000 mortgage in the UK when I earn £13,500?
Basically I just need a mortgage that allows me to have up to £75K on a wage of £13.5K .I didn’t think it would be that difficult when interest rates in some banks aren’t so high and you can have them for up to 25-35 years but no one is offering what I need on there sites. I fall short by 10 to 16 grand.
Answer: Try for an interest only mortgage over 20-25 years, and say in about 5 years look for a fixed mortgage. Financial Advisors will shop around for you, but will charge you £1000 plus upfront.
Question: Can I get a mortgage loan with a poor credit score rating?
Answer: Sometimes, but it depends on the specific loan. Usually because of the low credit score, your interest rates will be higher.
Question: What does an interest rate mean on your mortgage payment?
I have a conventional loan of 218,400 at 6.375. My monthly payment is 1904.99. On my last statement, $239.66 went to principal, while the rest to interest. We are at year 4 of our mortgage. I get the whole pay more interest at the beginning and at the end you pay more to principal. My main question is what does that 6.375 mean? How does that affect my payment. For instance, on a credit card the lower the interest rate, the lower you give to the company. But right now about 12-15 percent is going towards principals.
Answer: You are paying 6.375% interest per year (divided by 12 months) on the current balance {recomputed every month} of what you owe the bank. That is why so much of your fixed payment goes to interest, and a smaller amount to principal in the first few years. But as the loan balance comes down over time, you will be paying less interest and applying more of the payment to the loan (which means your balance will come down faster, less interest, more principle,……repeat until loan paid off.)
If you refinanced to a lower rate, you would have a smaller monthly payment. But unlike variable credit card interest rates and payments those amounts are fixed/set with a mortgage (but you can pay more principal; which is like investing your $ at 6.375% for the life of the loan while building up equity, and the payback period will be shortened, and you will pay less in overall interest.)
Question: What is the least amount of time you need to build credit to buy a house?
I have lived in an apartment for the past 6 years and my lease is up in 5 months. I have never had a credit card, and i show up on credit reports as having NO credit. I am getting a credit card this weekend, and I’m wondering if 4-5 months is enough time to get a good interest rate for my mortgage?
Answer: 4 or 5 months is not going to be great. You will have what’s called a “thin file” and it may get declined. Unless you have a nice down payment lets say 25% to 35%. You will need 5 to 7 years of SOLID credit history to get a good rate.
Question: What is so bad about being “under water” on your mortgage?
I know that 1 in 4 people owe more on their house then what it’s worth but I don’t understand how that can be bad if you have a regular mortgage payment (fixed) and you haven’t lost your job.
I understand why people who have adjustable rates are upset about it being worth less then they paid but I don’t understand what it affects if your still in ok shape financially. I mean, other then not being able to sell your house any time soon, I don’t understand.
Answer: The problem with that is that even when you sell the house for what it’s worth you still owe money on it and will continue to make payments on something that you don’t even own anymore.
It really only becomes a problem when the bank forecloses on it or if the homeowner has to sell. If the homeowner likes the house and keeps up on the payments it means nothing, the value should increase eventually. Over time, real estate always increases because of inflation.
And it’s incredibly silly to expect that you will always have a job and that the bank will be stable enough to not call up your loan. Stuff happens to everyone.