HOPE for Homeowners - should you refinance with H4H?
The HOPE for Homeowners or H4H government sponsored program that we mentioned in Obama Mortgage Plan article is something you certainly must be aware about, and I will leave you at that with regards to my opinion on it. You decide, if it is something worth pursuing. Basically if you are in troubles, HOPE for Homeowners offers to refinance your loan into a new 30- or 40-year fixed rate mortgage with lower payments, as long as you can find a participating lender which agrees to give you a new loan. The new mortgage will replace all of the current mortgages, wiping out all existing obligations you have against your home.
Lender takes a loss on the difference between the all existing mortgages and the new home loan. This new home loan equals to 96.5 percent of current appraised market value. Alternatively, the lender may offer you a more affordable monthly mortgage payment through a mortgage modification rather than accepting the losses associated with lower appraisal.
You will be eligible for the H4H mortgage as long as
- your existing mortgage was originated on or before January 1, 2008
- your current mortgage payment exceeds 31% of the gross monthly income
- you didn't intentionally default, don't own other residential real estate
- you have not been convicted of fraud in the last 10 years
- you did lie about income to obtain your existing mortgage
Now the costs/conditions and these you must consider quite carefully:
- 3% upfront mortgage insurance premium
- 1.5% annual mortgage insurance premium on your outstanding mortgage balance, which will be included in your monthly payments
- equity and future appreciation sharing with the Federal government
- no new junior liens against the property unless they are directly related to property maintenance
- normal closing costs on your new mortgage, received on a Good Faith Estimate
So, not only HOPE for Homeowners is expensive - on a new $200,000 H4H loan you pay $6,000 in upfront MI, $3,000 in annual MI which adds $250 to your monthly payment, but the Fed also owns a huge chunk of your present and future equity. I advise you to read carefully What costs do I have to pay? on equity sharing with the government.
Here also two links you should read - one from CNN Money and the other from San Jose Mercury News.
Mon May 4, 2009 10:05AM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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