Get Aid If You Are Underwater With Your Mortgage

May 12, 2010

Housing prices continue to be on average down 20% from the height of the housing bubble several years ago. These lower prices have caused many homeowners to have a negative equity in their homes. They are faced with the difficult decision of walking away from their home and suffering the consequences of a bank foreclosure. Here is some advice on what to do if you are faced with that decision.

Foreclosing your home will have a severe impact on your credit score and your ability to access credit, either for a new home or any other type of loan. Over the last year there have been many programs established to help homeowners to get out from under. Here is a summary of what programs are available and who can qualify for the aid:

  • FHA Refinance. The FHA will refinance mortgages into FHA loans while cutting the principal to 97.75% of your home value beginning this fall. You can qualify if you are current on payments on loans that are not FHA-insured. The lender must agree to it.
  • Home Affordable Modification Program (HAMP). HAMP changes loan terms to get payments below 31% of your income. Lenders must also cut principal on home that are more than 15% underwater. If your struggling to make payments on loans under $729,000 you can potentially qualify.
  • Home Affordable Refinance Program (HARP). HARP refinances mortgages into loans with lower rates or better terms. You can qualify if you are up-to-date on your payments and be no more than 25% underwater. Your loans must be backed by Fannie or Freddie, and the lender must agree.
  • Hardest Hit Fund. This program will give money to the 10 worst-off states to design programs for struggling and underwater homeowners. The details on this program are still being developed, but you can check for more information.
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