Making Home Affordable: The Differences Between Home Loan Modification and FHA Loan Refinance
The number of American homeowners struggling to meet their monthly payments as a result of the current recession is massively increasing. If you are one of these homeowners under huge amounts of stress as a result of such financial difficulties, this article will help you to figure out what you can do to ensure your mortgage is covered. It will provide you with the appropriate knowledge about both home loan modification and FHA refinance.
Two of the best options available to homeowners who have been painted into a corner with their home mortgage loans are loan modification and FHA refinance, and which one is right for you depends mostly on who insures your loan. To find out, call your lender and request that information. The three big insurers of mortgage loans are Freddie Mac, Fannie Mae, and the FHA (Federal Housing Administration.) None of these companies actually lend the money, but they are commissioned by Congress to insure 100% of the loaned amount of money. This minimizes risk for the lenders and gives you the chance for a better interest rate.
FHA loans and loans insured by Freddie Mac or Fannie Mac are not hugely different. However, the insurer covering your loan does factor in the options available to your when it comes to restructuring your repayments to make them more affordable. President Barack Obama’s is currently running a Making Home Affordable mortgage loan modification program and this scheme works alongside loans that are covered by Freddie Mac or Fannie Mae. For those in receipt of FHA covered loans, there is the Hope for Homeowners plan, which allows refinancing of such a loan to maximise its affordability.
‘Refinance’ sometimes immediately sounds alarm bells for some people as many have previously been told that they are ineligible for refinancing. However, a great number of these people who were informed that they do not qualify for such refinancing previously are not finding themselves eligible under the Hope for Homeowners scheme. Such disqualification in the first place was owed to the current climate and subsequent drop in house prices. Once property values dropped below 20% of equity, refinancing in its traditional sense was no longer an option.
The making Home Affordable plan incorporates a means of loan modification to reduce the monthly repayment a borrow makes. Incentives associated with the plan include payments to both borrowers and lenders to encourage the acceptance of more such applications and simultaneously promoting stability in the economy. For those loans insured by the FHA, the Making Home Affordable scheme is not an option. However, loan modification is available through other means and, in fact, loans backed by the FHA are modifiable with fewer restrictions.
Learn more about Obama Mortgage Relief Plan Qualifications.
