Struggling to Refinance? Consider the Government
January 29th, 2010 categories: Economic Recovery, For Homeowners, Mortgage Info
Mortgage interest rates are still at historic lows. But many Chicago homeowners haven’t been able to refinance to take advantage of them because the values of their city condominiums or single-family homes have fallen.
Most mortgage lenders or banks require homeowners to have at least 20 percent equity in their homes to qualify for a refinance. But the city of Chicago’s median sales price dropped to $215,000 in November of last year, according to the Illinois Association of REALTORS®. That’s down 3.4 percent compared to the $222,500 median price in November of 2008.
Those homeowners who purchased city condos or single-family homes in 2005 or in the first half of 2006 have more than likely seen their residences’ values fall even more significantly. These buyers were purchasing while the real estate boom was raging, meaning that they were more likely to pay far more for their condos or single-family homes.
What can homeowners do if the value of their Ravenswood two-flat or Lakeview condo has fallen so much that they don’t have any equity in their residences? What if they are underwater on their mortgages, owing more on their homes than what they are worth? This is hardly an unusual situation today. The latest data from First American CoreLogic shows that one in every four homeowners across the nation is underwater.
These homeowners’ best bet might be to contact their mortgage lender or bank and ask if they are offering refinances as part of the federal government’s Home Affordable Modification Program. Under this program, designed to provide some financial relief to struggling homeowners, mortgage lenders can refinance the mortgage loans of homeowners who owe on their first mortgage loans as much as 125 percent of their home’s value. This means that the owners of a $200,000 home could owe as much as $250,000 on their first mortgage and still qualify for a refinance.
Of course, you’ll have to meet certain requirements to qualify for a Home Affordable Modification Program loan. Your home’s loan must be owned or guaranteed by Freddie Mac or Fannie Mae, and you must be current on your mortgage payments.
The vast majority of mortgage lenders are participating in the federal program. But even if your lender isn’t, you should still call. Lenders can opt to refinance your loan at their own discretion, even if you are underwater.
PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.
