Best Mortgage Refinance Assistance Programs
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Best Mortgage Refinance Assistance Programs
There are multiple mortgage refinance assistance programs available to borrowers. In general, the goal of refinance assistance programs is to help borrowers obtain more affordable mortgages or exit their existing mortgage with as little hardship as possible. There are different types of refinance programs depending on your situation plus each program has different eligibility and qualification requirements. Some programs are focused on borrowers who can afford their mortgage payment but who have limited equity in their home, which makes it very challenging to refinance.
For example, the Enhance Relief Refinance Program and the FHA, VA and USDA Streamline Refinance Programs all enable you to refinance your mortgage without obtaining an appraisal report. These programs require less documentation and also apply more flexible qualification guidelines, including a higher or no loan-to-value (LTV) ratio limit which makes them especially applicable to borrowers whose homes are underwater, which means your mortgage balance is greater than the value of your property. These programs may also not require a minimum credit score or apply a maximum debt-to-income ratio for many applicants, which makes it easier to qualify for a refinance. Ideally, you can use these programs to refinance into a lower mortgage rate and more affordable monthly payment.
The downside to these mortgage refinance assistance programs is that they are not available to all borrowers or all types of mortgages. For example, the Streamline FHA Program can only be used to refinance and existing FHA loan. The same applies for the USDA and VA Streamline Programs. Additionally, the HARP 2.0 Program is no longer available and was replaced by the High LTV Refinance Option Program and the Enhanced Relief Refinance Program, which is only available if Freddie Mac owns or secures your mortgage. While these programs offer significant benefits, you should make sure that you qualify for the program and that your mortgage is eligible before you apply.
Loan modification assistance programs are for borrowers in financial duress but who want to keep their homes. These programs are focused on borrowers who may not be able to pay their mortgage unless they reduce their principal loan balance. The FHFA Principal Reduction Modification Program, Flex Modification Program and Principal Reduction Alternative Program are all loan modification programs that you may be able to use to lower your mortgage balance. Reducing your loan balance lowers your monthly payment and financial obligation which makes your new mortgage more affordable.
Eliminating, or forgiving, a portion of your mortgage is a significant event so the qualification requirements for these programs are more challenging. It is important to highlight that modifying your loan may be a taxable event so be sure to understand the tax consequences of these mortgage assistance programs.
The final category of refinance assistance programs is for borrowers who know they cannot afford their home and want to transition out of their mortgage with as little financial impact as possible. The Home Affordable Foreclosure Alternatives Program (HAFA) allows you to sell your home without being responsible for the shortfall in paying off your mortgage. This makes it more manageable for borrowers to get out homes and mortgages they cannot afford.
Use the FREEandCLEAR Lender Directory to search for twenty-five mortgage programs including several refinance assistance options.
Mortgage refinance assistance programs are provided by different organizations. You apply for the Enhanced Relief Refinance Program and the FHA, VA and USDA Streamline Refinance Programs with participating lenders. You usually apply for the principal reduction and foreclosure assistance programs through a government agency or HUD-approved state or local housing commission. These organizations may also offer additional homeowner assistance or foreclosure prevention programs that help you keep your home. The federal government's Making Home Affordable Program is another helpful resource for borrowers who are struggling to pay their mortgage.
The tables below summarizes numerous refinance assistance programs. Click on the program title to review more detailed information about each program. It is important to understand how each program works as well as their eligibility and qualification requirements so you can determine the best refinance assistance program for you.
Conventional Refinance Assistance Programs
- The program does not apply a maximum loan-to-value (LTV) ratio which makes it applicable for borrowers who are underwater on their mortgage
- The program does not use a minimum credit score or maximum debt-to-income ratio which makes it significantly easier to qualify
- To use the program your mortgage must be owned or secured by Freddie Mac
- The program does not use a maximum LTV ratio, minimum credit score or maximum debt-to-income ratio for most borrowers which enables more people to refinance their mortgage
- Uses simplified income and employment verification guidelines
- Your mortgage must be owned or secured by Fannie Mae to be eligible for the program
- The HARP 2.0 Program is no longer available and was replaced by the Enhanced Relief Refinance and High LTV Refinance Option programs as of 2019
- The HARP 2.0 program was designed to help homeowners who are current on their mortgages but whose homes are underwater
- If your house is underwater it can be almost impossible to refinance your mortgage without using a program such as HARP 2.0
- HARP 2.0 was designed to help borrowers refinance into more affordable, more stable mortgages
Government-Backed Streamline Refinance Programs
- The Federal Housing Administration (FHA) offers a streamline refinance program that requires reduced qualification requirements as compared to a traditional mortgage refinance, saving current FHA borrowers time and money
- The FHA Streamline Refinance Program does not require an appraisal and there is no loan-to-value (LTV) ratio requirement so it is very useful if you are underwater on your mortgage
- The program does not require borrowers to provide their credit report or verify their income or assets although lenders may have their own borrower qualification requirements
- The Veterans Administration (VA) offers a VA Streamline Refinance Program for eligible VA borrowers that requires limited qualification requirements as compared to a traditional mortgage refinance. The VA streamline refinance program is also known as an IRRRL (Interest Rate Reduction Refinancing Loan) or a "VA to VA" refinance
- With the VA Streamline Refinance Program, the borrower is not required to provide a property appraisal or credit report. Lenders, however, may apply their own mortgage qualification requirements
- Except when refinancing an existing VA adjustable rate mortgage (ARM) into a fixed rate mortgage, the VA streamline refinance must result in a lower interest rate. When refinancing from an existing VA ARM mortgage to a fixed rate mortgage, the interest rate may increase
- The VA Streamline Refinance Program is designed to save VA borrowers money on their refinancing as well as on their new monthly mortgage payments
- The USDA Streamline Refinance Program enables borrowers to refinance an existing USDA home loan with significantly fewer borrower qualification requirements than a standard mortgage refinance
- The Program does not require borrowers to obtain a property appraisal report, provide a credit report or meet debt-to-income ratio requirements
- There is no loan-to-value (LTV) ratio limit which means borrowers who are underwater on their mortgage are eligible
- By simplifying the refinance process, the USDA Streamline Refinance Program is designed to save eligible borrowers time and money
Loan Modification and Principal Reduction Programs
- HUD offers a range of foreclosure-prevention programs and counseling services to help you stay in your home
- Review refinance assistance programs and learn how to avoid foreclosure and mortgage scams that target struggling home owners¬†
- The program is designed to help eligible, delinquent borrowers become current on their mortgage, reduce their mortgage payment and avoid foreclosure
- Program features include addressing past due payments, a reduction in interest rate, extending the mortgage term to 40 years and potentially reducing the principal mortgage balance through loan forbearance or forgiveness
- The goal of the Flex Modification Program is to help struggling borrowers modify their existing mortgages into more affordable loans
- The Flex Modification Program targets distressed borrowers who are more than 60 days delinquent on their mortgage or who are in imminent risk of default
- The program is designed to reduce your monthly mortgage payment by at least 20% so that your total monthly housing expense is no more than 40% of your monthly gross income
- Eligible borrowers may be able to reduce their mortgage balance by up to 30% using the Flex Modification Program
- You should contact your current lender to determine if you are eligible for the program
- The HAMP Program expired on December 31, 2016 and was replaced by the Flex Modification Program (see above)
- The HAMP program provides lenders with financial incentives to help distressed borrowers modify their mortgages
- By modifying your mortgage through the HAMP program you may be able to lower your monthly mortgage payments in order to make them more affordable and sustainable for the long-term
- The Principal Reduction Alternative (PRA) was designed to help you by encouraging mortgage servicers and investors to reduce the amount of your mortgage
- The PRA program is designed for borrowers who are significantly underwater on their homes
- The Second Lien Modification Program (2MP) is designed to help borrowers that have a home equity loan, HELOC, or some other second mortgage that is making it difficult for them to make their mortgage payments
- 2MP works in tandem with HAMP to provide comprehensive solutions for homeowners with second mortgages to increase long-term affordability and sustainability
- The Home Affordable Foreclosure Alternatives (HAFA) program is designed for borrowers that cannot afford their mortgage payments and recognize that it is time for them to transition to more affordable housing
- Unlike conventional short sales, a HAFA short sale completely releases you from your mortgage debt after selling the property. This means you will no longer be responsible for the amount that falls "short" of the amount you owe on the mortgage. The deficiency is guaranteed to be waived by the mortgage servicer
- The FHA Short Refinance program is designed for borrowers with FHA-insured mortgages who are not behind on their mortgage payments but whose mortgages are greater than the value of their properties
- FHA Short Refinance is designed to help homeowners refinance into more affordable, more stable FHA-insured mortgage
- If you are unemployed and struggling to pay your monthly mortgage payment, the Home Affordable Unemployment Program (UP) may reduce your mortgage payments to 31% of your monthly gross income or suspend them altogether for 12 months or more
- To be eligible for the UP program you must be unemployed and eligible for unemployment benefits, occupy the house as your primary residence, have not previously received a HAMP modification and you must have obtained your mortgage on or before January 1, 2009
"Understanding Relief Refinance." My Home by Freddie Mac. Freddie Mac, 2019. Web.
"Options to Stay in Your Home Overview." Know Your Options. Fannie Mae, 2020. Web.
"Making Home Affordable." U.S. Department of the Treasury & U.S. Department of Housing and Urban Development, 2019. Web.
‚ÄúIf I can't pay my mortgage loan, what are my options?‚ÄĚ CFPB. Consumer Financial Protection Bureau, August 25 2017. Web.About the author