Which Mortgage Option Available for Homeowners
by admin ~ March 19th, 2009.The mortgage loan modification plan aims to help four million borrowers who are behind in their payments or are at risk of default. That includes those who are those suffering serious hardships, declines in income or increases in expenses; facing an interest rate hike; having high mortgage debt compared to income; owing more than their house is worth, or demonstrating other reasons for being close to default.
The mortgage refinancing plan aims to help five million homeowners who have loans backed by Fannie Mae and Freddie Mac. In order to qualify, borrowers must owe between 80% to 105% of the value of their home. They must also be current on their payments, meaning they haven’t been more than thirty days late on mortgage payments in the last twelve months.
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For those who qualify, the government would reduce payments to 31% of the homeowner’s income, as long as it doesn’t reduce the mortgage rate below 2%. After five years, the rate will increase by 1 percentage point a year until it reaches either the original rate or what the prevailing mortgage interest rate was at the time the loan was modified. Whichever is lower will apply. If rate reductions aren’t enough, a mortgage lender can extend the mortgage term up to forty years, or shift part of the principal to the end of the loan at no interest. Servicers also have the option of reducing the loan’s balance. Borrowers must owe no more than $729,750, excluding interest or other additional costs. The home loan must have been originated before Jan. 1, 2009, and total monthly mortgage payments must be more than 31% of pre-tax household monthly income.
To qualify for the $8,000 tax credit, the purchase must be made between Jan. 1, 2009, and Nov. 30, 2009, and buyers must make less than $75,000 a year (or $150,000 per couple). The credit begins to phase out for people with income levels of up to $95,000 a year (or $190,000 for couples). Buyers may not have owned a home for the past three years to qualify as “first time” buyers. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
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