Government Mortgage Help
Making Homes More Affordable

Providing government mortgage help is one area of the economy where the current administration has been paying much attention, both last year and so far this year.

New legislation has been introduced to make it easier to restructure your mortgage, making repayments simpler, and helping many homeowners avoid foreclosure proceedings.

The Homeowner Affordability and Stability Plan

This plan was introduced by the Obama administration in February of 2009 with the intention of aiding struggling homeowners The plan uses a two-pronged approach, providing assistance to homeowners already facing foreclosure and also giving more flexibility for those who are still making monthly payments to reduce the monthly burden of their loan.

Note that this plan is designed for owner occupied properties only. If you are having problems with a mortgage on an investment property, you will not be eligible for government help from this program.

Who Qualifies for Help When Facing Foreclosure?

There are several stipulations in the law about who is eligible for help. This is to make sure people don’t deliberately buy houses that are out of their league because they think they can fall back on mortgage help from the government if things go wrong. The qualifying criteria are slightly different depending on whether you are seeking to avoid foreclosure or you just want to refinance your loan.

Here are some of the criteria you must meet in order to be eligible for government help with your mortgage.

• The home mortgage in question must be your primary residence and not an investment property.
• The first mortgage on your home cannot exceed 105% of its current value or you will not be eligible.
• The loan must be owned by Fannie Mae or Freddie Mac.

Obviously, this program may be worth a look even if you don’t think you would qualify. If are eligible for assistance, you may be able to reduce the interest rate of your home mortgage loan which would translate into paying off more principal each month as long as your monthly payments remain the same.

You can also negotiate with your lender for lower monthly payments, easing pressure on your limited income. This would most likely be done by extending the term of the loan which would yield lower monthly payments but increase the overall cost of the mortgage.

More Government Mortgage Help with Home Affordable Refinance

Home Affordable Refinance is a plan targeting people who are not in danger of foreclosure in the immediate future, but whose mortgage payments eat up a significant portion of their monthly income. The government wants to help these people keep their homes by lowering monthly mortgage payments. Over time this should reduce the number of foreclosures and provide some much needed pricing stability to the housing market.

In most cases this involves extending the term of the loan and converting to a fixed interest rate. For example, if you are currently paying your mortgage over a 15-year term with a variable interest rate extending the term to 30 years and converting to a fixed interest rate could result in a substantially lower monthly payment. This lower monthly payment could serve to relieve some short-term financial stress.

Of course, this also means you will continue to make monthly mortgage payments for a longer period of time and accrue a higher overall interest expense over the life of the loan. Keep in mind that this assistance is only available if you actually have the income necessary to cover the new monthly payments.

There is also the Affordable Home Modification program, which can help you refinance your mortgage loan so that monthly payments don’t exceed 31% of your monthly income. This is a standard used by many lenders to determine if someone will be able to service a mortgage over the long haul.