- 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.