How to Qualify for the Obama Refinance Program

For most homeowners, their mortgage is their largest bill each month. When trouble strikes, it can make those payments that much more difficult, leaving some needing to refinance or get out of their houses altogether. The refinance program offers an opportunity for relief for many of those homeowners to get back on solid ground. If you're currently underwater on your house or even have lost your job, here are some things to keep in mind with the Obama refinance program.

What is the Obama Refinance Program?

Providing relief to burdened homeowners was a key agenda of Obama, spearheaded by the Home Affordable Refinance Program (HARP) government program. The HARP government program allows homeowners who are underwater, owing more than the home is worth, the ability to refinance their mortgages to a lower interest rate.

The ability to refinance under HARP allows you to do a few key things. First, and foremost, it allows you to lower your monthly mortgage payment. In fact, HARP states homeowners may be able to save $200 per month on their payment. Second, as a result, you can use those savings to apply towards your principal, pay off debt, save for retirement or more.

If you're currently paying 5-6%, or more, on your mortgage, it may make sense to research if you qualify to refinance under HARP. Following are some of the key things you need to qualify for a HARP refinance:

  • You need to be current on your mortgage. You can't have had a 30-day or longer late payment in the previous six months and can only have had one late payment in the past year.
  • You can only refinance your primary home.
  • The mortgage must have originated on or before May 31, 2009.
  • You can only refinance Fannie Mae or Freddie Mac mortgages.
  • You must have a loan-to-value (LTV) ratio greater than 80 percent.

Your bank may have additional requirements, so you will need to check with them. It's also imperative to know what kind of loan you have as VA, FHA, USDA and Jumbo mortgages do not qualify for a HARP refinance. You can use any lender to do a HARP refinance; start by checking rates online to see what you might qualify for.

Going Beyond HARP

While the HARP government program is popular, there are several other assistance programs that fit under the Obama refinance program. Those programs include:

  • The Home Affordable Modification Program (HAMP) – HAMP works in a number of ways, from allowing homeowners to adjust their interest rate to extending their term or reducing their outstanding principal. The government estimates those who qualify save approximately $500 per month. Here's further information to consider before you apply for the HAMP program to ensure you qualify.
  • The Home Affordable Foreclosure Alternatives Program (HAFA) – Whereas HAMP typically allows people to stay in their homes, HAFA is for individuals seeking to get out from under their mortgage completely – allowing them to leave their homes. The government allows you to do a short sale or deed in lieu of foreclosure and even offers relocation assistance of $10,000. Here's further information to consider before you apply for the HAFA program to ensure you qualify.
  • Home Affordable Unemployment Program (UP) – Losing a job can be detrimental to your budget, especially if you have a mortgage payment. UP seeks to relieve that stress while you look for a new job. Through UP you're able to stop payments for up to 12 months or reduce them to no more than 31 percent of your gross income. Here are some additional things to keep in mind if you think you might qualify for UP.

As a whole, the four initiatives under the Obama refinance program provide a wide array of options to help you recover.

What to Keep in Mind

It's important to remember that the Obama refinance program is robust, offering different means of assistance. As such, each program has its own qualifications you need to know. For example, if you're at risk of losing your job you may want to consider UP, whereas if you simply want to save money, you may want to look at HARP.

Additionally, it's important to keep in mind that a number of these programs expire at the end of 2016, with HARP running out in September 2017. If you think you may qualify for one of the assistance programs, it makes sense to research which works for you before time runs out.

Bottom Line

There are many options out there to consider if you're having problems making mortgage payments. Do your due diligence to find the best fit under the Obama refinance program to get relief.

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