With the current economic crisis in line, many individuals are wondering what they should be doing about their current mortgages. The Federal Reserve is again considering a drop in the key lending rate paid by commercial lenders to borrow money. This rate then is translated to the average consumer at a higher level, of course. Nevertheless, when this key lending rate is cut by the Fed it does translate into a lower interest rate for most all consumers. Does this mean anything to you, as a mortgage holder?

It Should

For those currently with an interest rate higher than the average rate, consider your options for refinancing.  A drop in this lending rate would likely translate into a lower interest rate available for most qualified home buyers or mortgage borrowers. If you currently have a mortgage, you could, potentially, refinance the home loan you have. This would translate into a lower monthly payment and a lower cost in the home loan totally.

Here are some numbers to consider:

Let’s say you have a mortgage loan of $150,000 and your home is appraised for at least that much. Your current interest rate is 8 percent. You are likely paying about $1100 a month. When you finish repaying your mortgage loan, you would have paid more than $246,000 worth of interest alone (not including the original borrowed $150,000.)

If interest rates drop as they should, you could see current rates fall as low as 5 percent. You refinance your $150,000 mortgage for 30 years at this new rate. Your monthly payment would drop to about $805. More importantly, over the course of the loan, you would pay a bit more than $139,800 in interest, plus the principle. As you can see, that’s a sizable difference and it is your money, after all. It is over $106,000 of your money, in fact.

What To Do

If you know that your home’s value is high enough to refinance, you should consider it. If you are unsure, you can contact any of the FHA loan specialists available to help you. Remember that even those with credit that may not be perfect can qualify for FHA loans. In addition, these loans often help you to qualify for lower down payments on standard loans and easier refinancing terms if you currently have an FHA loan.

In other words, if interest rates do drop, you should be part of that benefit.

With the economy so low, you may be struggling to keep up with payments and you are worried about your job. This may be a good time to refinance. FHA mortgage refinancing is an option that many homeowners want to consider. Interest rates are very low right now, the lowest they have been in the last few years. Lenders are looking harder and faster for new borrowers that are qualified. Refinancing your home loan that is in good standing is relatively easy to do, right now.

3 Reasons To Refinance Now

Why should you refinance your home loan right now? Take into consideration the following 3 reasons.

#1: Interest Rates Are Lower

Interest rates are a fraction of what they normally are. Many economists believe they are at the lowest they will go. This means that you won’t get a much lower rate any time in the near future, assuming they are right. If you have a home loan that currently has an interest rate that is one or more percentage points higher than what FHA lender can provide you, consider the benefits of refinancing.

#2: Refinancing May Cut Monthly Payments

Another reason to refinance right now is that you could get a lower monthly payment, which can help many to put more money in the bank, have more money for every day needs and even help to feel more secure financing in the current economy. You can extend the terms of your loan to cut the amount you pay each month. Or, if your current interest rate is high, you will save money simply by refinancing at a lower rate.

#3: A Fast, Easy Refinancing Program Is Available

If you already have an FHA insured mortgage, that is current, and you will be refinancing to lower your monthly loan payment, and do not plan to take any cash out of the loan, you can qualify for the FHA streamline refinance. It is a simple, no hassle way of refinancing. You simply need to work with an FHA loan specialist to help you to qualify. There is minimal cost, minimal documentation required and smaller underwriting requirements.

Worried?

I have spoken to a number of people right now that are worried about losing their home or their job. They fear that they will be unable to make payments, especially those that have a mortgage that will be adjusting in the next 12 months. Yet, there is hope available to help you through the process.

Refinancing FHA mortgage loans like this can help you to lower you monthly commitment. There are a variety of programs available to help you get into a home loan you can afford. You do not have to worry about your home, but you do have to be proactive. If you can save a few hundred dollars a month off your mortgage payment, would it e worth going through the process of refinancing? For most, the answer is yes.

Definitely take the time to consider the benefits.

When It’s Not Time To Refinance

There are some situations where refinancing FHA mortgages may not be in your best interest:

• If you have a comparable low interest rate already, there is likely no benefit to refinancing unless you change the terms of the loan.
• If you have very poor credit right now, you may need to work on boosting that credit before you will be able to qualify for an FHA loan.
• If your home is in foreclosure, and is too far into the process, there may not be the option to refinance.

Before you make that decision on your own, though, be sure to contact the FHA loan specialists here. They can provide you with guidance as to if you qualify and what the benefits of refinancing your FHA mortgage will be. Even if you are in foreclosure, they may be able to help.

FHA loans are loan insured through the Federal Housing Administration.  These loans are not held by or funded by the FHA, but rather funded by commercial lenders (they must be approved prior to providing these loans.) What makes them different is that the lender is able to take an “insurance policy” out on the loan. If the borrower of the loan defaults, the lender is able to recoup some of their invested money by selling the property and by collecting an FHA insurance payment.

What Does This Mean To You?

As you take into consideration how the FHA works, consider how it affects you, the individual hoping to purchase a home in a troubled economy. There is no doubt: now is the time to buy especially if you have a good credit score, a down payment and want a good deal. Home prices are at much lower prices than they were just a few years ago. But, what if you want to save even more money on your home loan purchase?

To get cheap home loans, consider FHA loans. Because these loans have an insurance policy on them, of sorts, the lender is less at risk of losing their investment in the loan. With the opposite type of loan, a conventional loan, there is no guarantee that they will be able to make up this cost. Even if they foreclose on the property of a default borrower, they still take thousands in losses.  To the lender, the risk of an FHA loan is lower and therefore they are not as worried about the loan. In return, interest rates are lower.

Lower Risk = Lower Interest Rate

There is no way to know what your interest rate will be until you apply for or at least talk to an FHA loan specialist. You are likely to get a far lower interest rate with an FHA loan than you would if you obtained a conventional loan.

Where’s The Catch?

Many people fear a catch. What is behind this type of loan? You still have to qualify for the home loan. You still have to have a down payment for the home loan, but it is far lower than those f conventional loans. You do have to have a decent credit score. The days of having a very low credit score and no down payment and still getting a home loan are gone.

Nevertheless, FHA loans are solid investments. They can help more people to qualify and they are, by all accounts, the cheap home loans you are looking for.

While there are many proposals in the works to help the ailing mortgage industry, one group seems to still be struggling to get into a decent home loan even with good credit. That is the self employed. Mortgage loans have always been somewhat difficult to get if you do not have a standard job, but the current trends seem to make it a bit harder.

Are You Self Employed?

The credit markets are starting to thaw and that means that more people are able to qualify for home loans. Those that are self-employed are still struggling to get the same treatment.

Self employed individuals, such as doctors, attorneys, small business owners and even accountants, may have good or better credit and a sizable back account, but without that steady paycheck, many lenders have shied away from loaning to these individuals. The problem is the lack of a W-2, the document that most people get in the mail at the end of the year stating that they worked for a company and earned a set amount of money. Rather, self employed individuals seeking a home loan will need to use an income tax return instead. Tax deductions that many of the self-employed receive often lessen the income, too, making it harder to prove that they do make enough to afford a home loan.

What Can You Do?

If you are in this position, where you are struggling to get a home loan because you are self employed, you may qualify for FHA financing. The FHA provides more flexible terms for borrowers. There are still specific goals that need to be met, including minimal down payments on the home and a decent credit score. Yet, the FHA loans are often easier to obtain for those who have trouble proving their income. These loans can be the best opportunity for individuals who may struggle to qualify for other types of loans.

According to some lenders, credit is the most important factor in obtaining a home loan. Yet, for the self employed, even high credit scores (in one case a woman was denied a home loan even though her net worth was three times that which she was requesting and her credit score ranked in the high 700’s) can hold you back. Proving to lenders that you are a good credit risk can be tricky, but it is something you must do.

FHA lenders can help you to avoid some of those obstacles. You still need to show income proof and you will need to be qualified for the home loan. FHA requirements are much lower. You will still need to meet qualifications including:

• 2 years worth of income tax returns
• If you have less than one year of self employment income to prove, you may not be eligible without some other proof of employment prior to this
• Federal business income tax returns for the last two years, for all corporations of “S” corporations and all partnerships
• Profit and loss statement and balance sheet showing your income
• A credit report from your business, in some cases

The FHA lender will need to take your income over the last two years (which you need to have proof of,) and will average it over that time. Provide them with additional information, such as income growth patterns over the last months. A detailed letter explaining expenses as well as any fluctuations in income is important.

With a good credit score, there is help for those who do have the need for a home loan even if they are self-employed.  FHA specialists can help you to qualify for these loans.

As a homeowner struggling to make your monthly payment, you may have to choose between things like seeing a movie, Christmas presents or even food on the table just to keep the roof over your head. In a recent press release, HUD, the Department of Housing and Urban Development announced a new loan modification program, which has plans to offer individuals struggling with their mortgage some help.

Note The Changes

The program, being called Hope for Homeowner, has undergone some further modifications. The goal is to get lenders to participate, something that has to happen for anyone to get their loan under the microscope for improvement. The new modifications to the program allow the lenders to write off less of the loan value than in prior situations.

The homeowner will benefit from this program because the lender will renegotiate the mortgage with them. They get a lower monthly payment and therefore have the money they need to make the monthly payment. In order to help make this possible, the loan terms (the length of the loan) can now go to as much as 40 years.

The Hope for Homeowners program is designed to help individuals to get into new loans if they are struggling with their own. The goal is to make the loans affordable for each borrower, so that foreclosure can be avoided. To do this, the rules of the program state that the monthly payment on the mortgage cannot be more than 31 percent of the homeowner’s monthly income.

The rules also allow for the lender to write down the loan to 96.5 percent f the home’s actual value. This is up from the 90 percent it was when the program first came to be this summer.  Another change is in the amount of debt that the home has. As a homeowner, you may not have household debt of more than 43 percent of your monthly income.

In order to qualify for the Hope for Homeowners program, your home loan must have originated prior to January of 2008. You also have to have a loan amount that is lower than $550,440.

Do You Qualify?

Many people may qualify for this program. Others may not. All should make the move now to find a solution to their current financial situation.  The Hope for Homeowner program is one option that many people have, and anyone who may be struggling right now to make their loan payments should contact a loan specialist to get some help in qualifying.

If you are otherwise struggling with your debts, even if you do not quality for this specific program there is still help available to some. Refinancing your loan is an option. There are also program in place to help you to liquidate the lien you have on your home through a second mortgage or equity line, so that you can actually qualify for the Hope for Homeowners program or refinance your home otherwise.

These changes to the program may in fact help encourage more lenders to start working with their struggling borrowers. You do not have to wait to see if your lender approaches you, though. In fact, you likely should not do this. Rather, you should work with an FHA loan specialist or other lender to try and find a better solution for your loan. In many situations, homeowners are never aware that they do have options for saving their home.

In fact, even if you are not behind on payments or struggling to make them, these professionals can help you to refinance your loan into more affordable terms or to help you simply to save money.

Announced on Friday, the two largest lenders in the country, Fannie Mae and Freddie Mac, will not pursue foreclosures on some homes set to go on the chopping block in the coming months. More than 16,000 homes will be able to stave off foreclosure until January 9^th.  The only homes that may not qualify are vacant homes.

While the gesture buys these homeowners time, it is not a lasting fix. For any homeowner who may be included in this process, the two powerhouse lenders are trying to determine if you qualify for the new loan modification program that occurred recently. 

What are the options for someone who is in this situation or perhaps even someone that is heading into it? Let us look at what you can do now, even if you are not directly feeling the effects by these foreclosures halting.

#1: Do nothing, buy yourself some time over the next few months if you do have a Freddie Mac or Fannie Mae backed loan. If you aren’t fighting the foreclosure, you have a bit longer to find a new place to live. This is not the recommended option for most, though.

#2: Contact your lender and find out if the lender is offering a loan modification program. If you have a loan backed by either of these agencies, they you will find they will be willing to work with you to find n option, if one is out there.

#3: Contact your lender (even if you do not have a Fannie or Freddie backed loan) and as for loan modification or help in getting your loan caught up. Many lenders will work with you, even during the foreclosure process, since they are losing a sizable amount of money from each foreclosure.

#4: Call a foreclosure specialist or FHA approved specialist to give you the help you need. These professionals can work with you to find out what help is available and give you advice on what all of your options are (not just those that your lender wants you to consider.) This is the best recommendation for anyone struggling with their mortgage.

Unfortunately, while Fannie Mae and Freddie Mac do get a lot of attention since they are government backed companies, they are not the only lenders out there who are facing large numbers of foreclosures. In fact, the two only have about 20 percent of the delinquent loans on the books.

An estimated 4.4 million people are struggling to make ends meet and may undergo foreclosure in the coming year according to the Federal Deposit Insurance Corporation.  Each of these individuals is struggling to make ends meet and most of them need some type of support now, before the process worsens.

Many people will qualify for the new loan modification programs. If you are unsure if you do, or you need to know your options, don’t wait. There is nothing worse than waiting too long only to find out that you could have saved your home last week (after a certain amount of time, the foreclosure process is difficult to stop.)

For those who are struggling with foreclosure, contact a professional FHA specialist to get help now. If you are not currently suffering from foreclosure yet, but you are worried that this will become a problem for you in the coming months, act now. While the government is not going to protect your loan totally, there may be options including refinancing r restructuring of the loan. These options can help you to get back on track before the problem worsens.

The FHA, or Federal Housing Association, has grown in the last two years to a considerable size. This just shows how important this one agency can be when it comes to helping a country to get out of the mortgage hole it is in. The latest numbers are quite considerably. By the end of 2008, FHA will provide guarantees for as many as 3 in 10 American home loan borrowers. 

FHA provides only a guarantee to the loan, not the loan itself. Traditional mortgage lenders qualified to work with FHA still fund the loan and service it. Should the borrower default on the loan, FHA will pitch in to help cover the costs of the loan. This helps to insure the loan and therefore allows more lenders with assurance that they can lend to these buyers.

Many of the people that will be included in that picture are those with bad credit. Others are those who do not have any verification of income on the books (FHA loans can help hard to qualify lenders to get these loans.)

As you may know, the HOPE for Homeowners Program kicked in on October 1st, 2008 and gives FHA even more opportunity to help the average homeowner. The program is aimed at helping people to get better loans.  The program was put in place through Congress action and the Bush Administration. It gives FHA the ability to guarantee up to $300 billion in home loans. These are fixed rate home loans specifically for those who are struggling.  The program will be in place over the next three years.

What does this mean for the outlook? According to the Congressional Budget Office, there will be about 400,000 households in the US that will get FHA home loans in the coming years.  OF those, it claims that about one third of them will fall behind at some time on those loans.

What’s the risk?  There is risk here in the Hope for Homeowners program, according to some. They fear that the government is taking on some of the worst loans out there and that this could pose a risk.  Yet, FHA loan requirements are out there and they are much stricter than those offered subprime loans in the not so distant past.

FHA loans make sense and the ability of the FHA to provide this type of backing to the American family is necessary. The fact is: the only way to get out of the housing slump is to get good home buyers buying homes. This program and others like it, will continue to do that.

President-elect Obama has long been a supporter of FHA. In fact, he mentioned FHA loans during his first appearance in the national spotlight, his 2004 DNC Keynote address. And that was long before most Americans even knew (or remembered) what FHA was!

After the war, they studied on the G.I. Bill, bought a house through F.H.A., and later moved west all the way to Hawaii in search of opportunity.
-Barack Obama, July 27, 2004

Over at the Visionary Homebuilders of California blog, Carlos Ramirez has written a great post detailing Obama’s proposals for the FHA, the housing market in general, and ending predatory lending. I recommend checking it out!

Are you a homeowner in the United States looking for the American Dream? If so, you may be in trouble if you still have an ARM, or Adjustable Rate Mortgage. As you likely know, the last year or two has been very bad for the housing market and ARM rates are one area in which the problem got worse. Yet, many of those who did pick up a loan since 2002 have had that loan adjust already. This is the shock that has hit the housing market. There may be more shock coming.

What’s A Mortgage Reset?

Mortgage resets adjust the interest rate on the home loan a person with this type of loan has.  For example, let’s say that you have a home loan with an interest rate of 6 percent for the first three years.  You picked up that loan in 2006 and have since had no problems paying your mortgage loan. Now, the reset period is coming to an end and you are worried. When your loan resets, what is the likelihood that the loan will be too expensive for you?

There is a new wave of mortgage resets set to hit the country in the next months, and will likely continue through 2010 as a number of “option ARM’s” were put in place. These are subprime loans and some are not.  The point is, they are adjusting in the coming months which will cause a new wave of homeowners unable to pay their payments.

Do Something Now

If you are a homeowner with an option ARM or any other adjustable rate loan, now is the best time for you to make a change. What you will need to do is get that loan refinanced as soon as possible, before the loan is in fact adjusted.

FHA can help you to get into a more affordable loan if your loan has recent or will do so prior to the end of 2010.  This will be an outstanding opportunity for you to get a lower interest rate, fixed loan that likely could save you a substantial amount of money.

The worst thing you can do is wait it out. Right now, interest rates are very low. Even those with credit scores that are low may qualify (currently the FHA will accept credit scores at 580 or above.) You have the opportunity to save substantially.

Estimates are that some $500 billion worth of mortgages will be affected in the next four years by these adjustable rates. The FHA can help many to get out of this problem.

Before things really hit the fan with the housing market there were many proposed changes to FHA. When the sub-prime crisis went into full swing things got quite rushed and now it seems that FHA requirements and limits are different every week. On the Seattle Real Estate blog, Rain City Guide, Rhonda Porter offers a great rundown of all the current changes to FHA and things that will be changing in 2009.

One change that I’d like to touch on: Down Payment

Here’s Rhonda’s description of requirements that are effective January 1, 2009:

Minimum down payment increases to 3.5%. Home Buyers have until the end of the year to purchase under the 3% down payment requirement. Sellers can pay actual closing costs once the buyer meets the minimum down payment requirement (which can be gifted or loaned by a family member).

Some of you may recall that when FHA Modernization was in the planning stages some legislators were pushing for as low as zero down and for a time it seemed that it’d be under 1.5%.

Why the change to 3.5%?

The answer is simple: Legislators realized that dropping the down payment amount could turn FHA into the new sub-prime. Although this change will make it harder for some to be eligible for FHA Loans, it is also insuring that FHA Loans are being given to those who can afford to be home owners.