How to qualify for President Obama’s negative equity refinance program? This is a question I get asked on a daily basis now that this program is a few months old. This is in my view, one of the better efforts by the new administration to help families stay in their homes, it is also known as the “Making Home Affordable” program. I don’t think enough people know about or fully understand this loan program, because did you know it offers todays interest rates of around 4.875% even if you owe up to 105% of your property value, there are also a few lenders that are also offering this program up to 125% of your property value. As we all know rates are going to go up soon, so I wanted to send out this article so everyone fully understands how to qualify for this program, I hope this helps you or someone you know.
If you can answer “yes” to the following four questions then you will be allowed to apply for this program.
1. Does Fannie Mae own your current mortgage? not many people know if they do or not. Here is a great link you can use to check if your home is currently owned by Fannie Mae. http://loanlookup.fanniemae.com/loanlookup/ Just fill in the address information and if your result comes up as a “match found” then your loan is currently owned by Fannie Mae.
2. Have you paid your mortgage on time each month in the past 12 months? This program does not allow any mortgage lates in the past 12 months of your loan, this means you cannot be more than 30 days delinquent on your monthly payment.
3. Is the current loan amount on your mortgage less than $729k? This is the maximum loan amount that will be allowed to qualify for this program.
4. Do you owe less than or eqal to 125% of your property value? This is another question that many homeowners will probably not have the right answer to. You are free to use sites such as Zillow.com etc to get a free assesment of your property value, but these numbers are sometimes often inaccurate, so feel free to contact me so I can run your property value by one of my appraisers or use one of my automated appraisal options, this way you can get more accurate data so you can make an informed decision.
What will interest rates be for this program? Good credit scores are essential!
So, if you answered yes to all the aforementioned questions, you are now eligible to apply for this program. So the next question on everyones minds is, so what will the interest rates look like for this program? Well for loan amounts up to 105% loan to value of your property, you will qualify at todays low interest rates of 4.875% to 5% if you have a credit score over 740, but if you have a credit score between 700-739 you will pay Fannie Mae between .5-1% in points to obtain the same interest rate.
Essentially the lower your credit scores the higher the cost will be to obtain todays rates, and the higher your loan to value the more in points you will pay to Fannie Mae. This program works best if your loan is at 105% of the property value. Fannie Mae is having a lot of losses these days due to loan delinquencies, so the easiest way for them recoup some of those losses is through added fees like these on all future business (our lovely government at work).
No Mortgage Insurance and appraisal waivers!
There are some tremendous benefits to this program that must be mentioned. For example, if your existing loan does not have mortgage insurance and your new loan is now at say 105% of your property value, you will not have to get mortgage insurance on your new loan as the MI has been waived. But if you did have mortgage insurance on your exisiting loan, you will keep the same mortgage insurance premium % as before.
Also, There is a possibility that you will not have to do an appraisal on your property if your property has been given a “property waiver” when we run your application through Fannie Maes automated engine “DU”. I would say I have been able to get at least 25% of my clients funded without having to do an appraisal, as Fannie Mae already owns the note they are being more leniant with values on existing loans they are essentially rewriting at a lower rate.
Results so far
Myself and some of my colleagues have been reporting a lot of success with this program, especially for many homeowners that bought in the past few years and lost a lot of equity recently, so even if they are now at 95-105% loan to value, they still qualify for this new program. But also unfortunately, a lot of applicants had appraised values that come in too low due to many appraisers under the new HVCC ( home evaluation code of conduct ruling) not appraising these homes correctly (this is a whole new topic in itself for another day), so they were unable to qualify. This program is certainly not for everyone, but for those that can qualify it presents a great opportunity to save some extra money.
In Conclusion
I do believe that this program is probably one of the better ones initiated by this administration, and will help many homeowners lower their rate or fix their rate from an ARM to a fixed. There are still lots of homeowners out there who will be able to drop their interest rate from 6% down to 4.875% and save on average over $200 a month, if they know that this program exists. If you have any questions in regards to this program, or if you know someone this message may help, please feel free to contact me directly at 858-200-9602. You can also check out my blog at www.michaeladeery.com/blog for more information.
Sincerely
Your mortgage planner
Michael Deery