Lately the most difficult problem facing home owners who wish to refinance their homes its their lack of 20% equity in their home. Many home owners find 
themselves in this position because they:
- purchased with little or no money down
- neighborhood values have depreciated or remained flat
- borrowed or refinanced recently
Actually any or all of the above reasons could be blocking the home owner’s ability to refinance at today’s very low interest rates.
There may be a solution!
Obama’s Housing Stimulus Plan has a provision that may help home owners in this situation, if they meet the following criteria:
- must have conforming loans which are guaranteed by Fannie Mae and Freddie Mac
- Owe up to 5% more than their home is worth
- must be “credit-worthy” or “responsible” homeowners
If home owners meet the above criteria, they can refinance into a 30- or 15-year, fixed-rate loan based on current market rates. The refinanced loan, however, cannot include prepayment penalties (yeah!) or balloon payments.
For many families, this low-cost refinancing may help reduce their mortgage payments by up to thousands of dollars per year.
At the time of this writing, details about this initiative will be released at a future date – including what, if any, credit score requirements will be included.
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5 Comments
Thanks for writing about this issue. Of all the housing proposals, this is the hardest to take exception with. I know from experience: I bought an apartment in ‘07 with 20% down and a 30-year fixed — pretty responsible. However, even a slight dip in value would have made me unable to refinance because of the 80% equity requirement. Hardly seems fair — I put a big chunk down and am willing to pay fees to refinance, why should I (or others) be penalized for a slight dip in value?
No one seems to understand who, how what, you can qualify for, hopefully our President will clear some of this up tonight! I’m following your blog every day. I learn something new as always’. Be back for more tomorrow…..
Just wanted to remind you to spell check your article. There are many mispelled words which aren’t a good thing. I do appreciate the info.
Keith ~ Thanks for the head’s up. I agree, too many typos and spelling error are annoying! So much of my work is done late at night, so I guess I can use that as in excuse.
Cheers…
This has been a great tool for folks that are faced with this situation. Just last week the administration expanded this program to allow up to 125% LTV. This should help even more people.