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.