If you think you can refinance and are facing foreclosure due to your negative equity in your home, think again, there might be hope just yet. There is a government sponsored program called Making Homes Affordable that was set up to help struggling Fannie Mae and Freddie Mac. In order to help those who had a negative equity position in their home the program changed the guidelines to allow for mortgage refinances.
If you didn’t know, Fannie Mae and Freddie Mac were struggling. The real estate market fell apart and they insure mortgages so they struggled. This program has really allowed them to get back on their feet and now it’s the homeowners out there who need an refinance an upside down mortgage that need to take action.
Purchasing, refinancing for cash out or taking a line of credit within the past few years means that you were one of the unlucky ones and more than likely are facing a home with negative equity. This means you home is currently worth less than you owe on your mortgage. You might have taken out an adjustable rate mortgage and its about to adjust and a refinance could really help you keep the payments down. On top of that, interest rates at 5% for mortgage refinances are making homeowners look at refinancing due to the potential savings.
If your current home has negative equity then look for a refinance. Well, you might be in luck and get the government’s Government’s program for upside down mortgages to work for you.
Here are some basic rules to negative equity mortgage refinances:
1. The maximum LTV or loan-to-value is 125% of the current value excluding the second or the first only.
2. You may have to qualify with your existing lender depending on your circumstances.
3. If you have two separate lenders the second mortgage company will have to subordinate, or allow the refinance to happen.
4. Refinancing due to negative equity on a loan that currently has mortgage insurance will create an issue for you.
5. You will need to use the loan look up features at Fannie Mae or Freddie Mac’s sites to see if you are actually insured by these mortgage companies.
Those top five reasons should be enough to make you dangerous when attempting to refinance a negative equity mortgage. The process is not exactly easy these days but the outcome will be worth it to you once you see that your payment is lower and life is a little more manageable. Only the most knowledgeable of mortgage professionals can help you through this so choose wisely.