The Obama administration have announced the “Home Affordability Plan” Basically a housing stimulus plan for homeowners who have financial difficulties. This plan will help over 6 million current homeowners refinance their mortgage into a fixed rate 4.5% loan. Hundreds of dollars per month can be saved by taking advantage of this stimulus plan.

This plan will help an estimated 1 out of every 9 homeowners avoid defaulting on their mortgage and losing their home due to foreclosure. Under this plan homeowners are able to refinance their current mortgage even if they have been denied before, and even if they owe more than their home is actually worth.

This plan had to be carefully executed as the Obama administration did not want to look as if though they are giving a break to irresponsible homeowners who were reckless or greedy during the “Housing Boom” a few years ago. That is why the first step of this stimulus is geared towards helping homeowners who have been able to keep up with their mortgage payments for at least the past 12 months. However, regardless of your payment history their most likely is a good refinance option available to you.

Over 6 million homeowners will benefit from this plan, according to the Obama administration. Here are the 2 main parts to this plan to help homeowners save.

-Banks, mortgage lending services, and other mortgage providers will be given incentives from the government to ease the restrictions of refinancing a home for a homeowners who will otherwise default on their loan, or lose their house, due to financial problems. Borrowers will be required to sign affidavits of their “Financial Hardships” at the time of a refinance and the lenders will be taking on riskier borrowers for the government incentives. Homeowners who do this may see their mortgage rates drop as low as 2%, extend the length of their mortgage, or other ways to bring the mortgage monthly payment to 31% of the borrowers gross monthly income. A limitation to this is that the home must have a first lien mortgage, the homeowner lives in the home as a primary residence, and the mortgage cannot exceed $730,000 for a single family home. These mortgage lenders and banks that participate will get as much as $3500 dollars in government money just for taking part, as well as matching, up to a certain amount, of any costs the lenders or banks may have. Homeowners will be able to get up to $5,000 in federal money to pay off other loans, or reduce their debts, to help make sure that they do not face losing their home again. Again, Obama stressed, the homeowner must live in the home, and not use it as a second residence or investment property for eligibility.

-Mortgages backed by mega lenders Fannie Mae and Freddie Mac will be easier to modify. This means that the millions of mortgages backed by these 2 lending giants will be able to be modified for homeowners who have a mortgage that is worth more than their home, regardless of a financial hard ship or not. Also, there is no limit to the amount these mortgages can be for either. Eligibility requirements are just that the loan is backed by one of the 2 lenders, and the homeowner does not owe more than 105% of their homes value.

These are the basics of Obamas “Home Affordability Plan”. Refinancing a home mortgage is a serious decision that should be combined with patience and basic research on lenders, terms, and conditions of common home loans. Literally millions of homeowners will save hundreds every month due to this Obama stimulus plan. Take advantage now while this plan is still in effect.

-M Petrone

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