If you are struggling to make your payments, the Federal Government has created a refinance program to help you stay in your home as an Owner and avoid a short sale or foreclosure.
I learned a great deal at a local Real Estate Investment Club meeting this week regarding the new bill that was passed and went into affect October 1st to help homeowners. I am still reading all of the details on it, and I highly recommend that you talk to a lender for full better information. However, our government has developed a great refinancing option for those who want to avoid a short sale or foreclosure.
To sum it up, the new program allows a homeowner that is struggling to make their high mortgage payment to refinance into an FHA product at 90% of your home's current market value. HUGE DEAL.
The lender that currently has your mortgage agrees to take either the payoff or complete the refinance for you, but you don't necessarily need to use your current mortgage company to complete the refinance. If there is a second on your home, the second agrees to walk away. I know this seems crazy, but this is typically what happens with a short sale or foreclosure, however, here's the reason the lenders agree to do this:
1. They receive tax incentives for accepting the refinance.
2. When you sell your home, you share the profits with the lender. That's the kicker. So, if you sell your home within 1 year of completing the refinance, you give 90% of any equity received to the lender. This percentage reduces by 10% per year for up to 5 years with a 50% cap. So, if in 5 years, you sell your home, you give 50% of any money that you make on the home back to the original lender, and the lender will share these monies with the lender that had the 2nd on your home as well.
3. You pay a decent amount of mortgage insurance. 1.5% per year and a one time 3% fee.
However, you do not have to sell your home or foreclose. You have to qualify for the new loan, meaning you must be able to make the new payments, but consider this...
If your current loan is for $350,000.
Your homes current value is now $275,000
Your new loan is for $247,500
That is almost $100,000 difference and probably a difference in payment of $700/month
As I mentioned, I only have scratched the surface of this program, I'm sure it takes patience and determination to get it, but PLEASE, if you are struggling and contemplating a short sale or foreclosure, talk to a lender about this program. It helps our market from a flood of inventory, it keeps you and your family from being uprooted, and prevents a very bad stain on your credit. The new rules are showing that it will take 10 years for you to qualify for a new conventional home loan and 5 years for an FHA product if you foreclose. Homeownership is so important, and if you can figure out a way to take advantage of this program and stay in your home, it's better for you, our city, and our economy as a whole. Please call your lender for details.
Kit Fitzgerald
871-5288