If your savings have taken a decent hit over the past few months thanks to the economy, then you are definitely not alone. In fact, there are so many people in your position that the government has put a program into place that can allow you to reduce the amount of money you pay on your mortgage, all the way down to 31% of your yearly gross salary.
Sounds impressive, but the bad news is that it may not be easy to qualify for the program and that the government isn’t just willing to hand out the decrease to just anyone. You’re going to need to put in some work, stay dedicated to reducing your mortgage, and also benefit from a little bit of luck.
Here are a few tips to help you solidify your status as someone who deserves the help of the program and get the reduction you need.
Learn the Program Inside and Out
The program that we are talking about is the 75 billion dollar “Making Home Affordable Program” that was put in place by the Obama administration. It applies only to mortgages that are held by the mortgage holders that were taken over by the government. These are Freddie Mac and Fannie Mae, and with the guidance of the government, these two giants are cutting their interest rates to as low as 2% in order to ensure that homeowners are not paying more than 31% of their income towards their mortgage.
How do you know if either of these companies, in fact, owns your mortgage?
The easiest way is to visit each of their company websites and enter all the information about yourself and your home. While you may think that there is no way that your mortgage is owned by these lenders, they are companies that purchase loans from other organizations and companies. So, even though you may be serviced by a large bank such as Wells Fargo or Citibank, there is a chance that they sold ownership of your loan to one of these financial giants. And if they did, you are in luck.
Do you Qualify?
If you do find out that your mortgage is owned by Freddie or Fannie, then the next step is to determine if you may qualify for the loan reduction program. You have to calculate what portion of your gross monthly income goes towards your mortgage and other housing payments. This includes insurance, taxes, principal, and interest on top of your actual mortgage. If you notice that the percentage is especially large, then you will definitely benefit from applying to the program.
Entering into the Gauntlet of the Process
Fannie and Freddie are not responsible for servicing customers or dealing with the paperwork even when they do in fact own loans. Thus, it is up to specific banks to determine whether or not you qualify for the program, and that can be bad news considering how stingy many of the banks can be and the abundance of applications they receive.
One of the keys for qualifying for the program is to convince the bank that you are in the target market that the program is aimed at. The perfect market is the borrowers that are in dire need of financial help yet not too desperate that they are deemed as hopeless. This is simply because the program is meant as a way to make loans payable and thus make lenders money, not necessarily save people that are broke from bankruptcy.
Factors that Can Disqualify you from Contention
Even if your mortgage is a large chunk of your monthly income, there are a number of factors that may disqualify you from the program. Savings are a common reason for rejection, so if you have quite a bit of money stashed in your savings, it may lead to rejection from the bank.
On the flip side of the coin, if you have no savings whatsoever and are unemployed then you will also probably be rejected. Applicants need to provide proof of income and unemployment benefits do not fit into the category of acceptable income.
While this seems almost unacceptable to say and isn’t always advisable, it often doesn’t hurt to miss one or two mortgage payments if you are in need of the program’s help. This misstep will push you to the top of the list and can help push you past a number of potential applicants. However, this should only be considered if you are in dire need.
The Making Home Affordable Program is a big help for many people reeling from the effects of the economy, but there are only so many people it can help. The good news is that there is a lot of information available and a lot of free help that you can take advantage of.
Whatever you do, beware of organizations looking to make a profit out of your situation and avoid outfits that promise to modify your loans as long as you may a large upfront payment.