Homeowners who are upside down but still making timely payments on their mortgage take heart: a new federal program aimed at helping them refinance with a Federal Housing Administration (FHA) loan kicked into gear this week.
“The highly rated lenders we spoke with about this program were optimistic that it and other programs can help homeowners in trouble,” said Angie Hicks, founder of Angie’s List, the nation’s leading provider of
consumer ratings on local service companies, including
mortgage specialists and banks.
“But like them, we urge a cautious approach. No one expects the housing market to rebound quickly, but a well maintained home remains a valuable asset,” she added.
Hicks advises homeowners to review the terms of their mortgage and determine if the new program is right for them before approaching their lender to ask if it will participate in the
FHA Short Refinancing program. Other programs designed to help homeowners are also offered under the federal “
Making Home Affordable” program.
“It’s in the best interests of a reputable lender to work with clients to help them fulfill the terms of their loan,” Hicks said. “You might be surprised what your lender is willing to do for you, so don’t be afraid to start the conversation. The best lenders and mortgage brokers will be up-to-date on all options and should be able to give you great advice on how you can keep your home.”
Among the FHA Short Refinancing program requirements:
- Homeowners must owe more on the mortgage than the home is currently valued and the home must be your primary residence.
- The home’s current interest rate must be more than 6 percent.
- You must be current on your mortgage.
- Your lender or investor must be willing to participate in the program and write off at least 10 percent of the original first lien on the mortgage.
- You must qualify for the new loan under standard FHA underwriting.
- Your FICO score must be at least 500.
- You cannot participate if your existing loan is already backed by the FHA.
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