Obama's Federal Loan Modification Or Refinance - Which is Right For You?

President Obama's federal program, called Home Affordable, offers 2 basic options to struggling homeowners.  The first is a streamlined refinance program and the second is a standardized loan modification plan.  You may qualify for help under one of these programs - but which one is best for your situation?  Here is some information on the programs and what you need to qualify for each one to help you decide.

The Home Affordable Refinance Plan is designed to help homeowners who are current on their mortgage, but have been unable to refinance due to a reduction in their home's value.  The program will offer 30 or 15 year terms and will be subject to current market rates and closing costs.  Here are the basic requirements for eligibility with this government subsidized refinance program:

Cannot have been delinquent more than 30 days in the last 12 months
Must live in the home as your primary residence
Loan is owned or controlled by Fannie Mae or Freddie Mac
You owe no more than 125% of your homes current value
Must be able to prove income to support new mortgage payments
Only applies to first trust deeds-if you have a second that lender must agree to subordinate behind the new loan
If you can meet these qualifications, then the refinance program may be an option for you.  Keep in mind that if your current loan has a negative amortization option with an extremely low rate, or you are paying interest only, your new payment may actually increase.  The goal of this program is to offer the opportunity for homeowners to obtain a fixed interest rate loan.

The loan modification plan has different requirements for approval.  Your home loan does not have to be serviced by Fannie or Freddie, but does have some other criteria that you must meet.  Here are the basics of the Home Affordable Loan Modification Plan:

You must live in the home as your primary residence
Your principal balance must be less than $729,750 for 1 unit, more for 2-4 units
Loan must have been originated prior to January 1, 2009
Your current payment, including taxes, insurance and homeowners dues must equal more than 31% of your monthly income
Be able to demonstrate a financial hardship situation exists
If you answered yes to all of those items, you could be a good candidate for this loan modification plan.  Lenders are more motivated to help homeowners under this program because they will be paid by the Treasury Department for every qualified loan that is modified.  You do not have to be late on your payments to apply, but you must show that an imminent hardship exists that will cause future delinquencies.

Second loans are also eligible under the Home Affordable Modification plan.  Interest rates will be reduced to as low as 1%, and certain loans may be retired or forgiven altogether with the Treasury Department reimbursing the lender at 12 cents on the dollar.  If you have a second loan, be sure to apply for a loan workout on that mortgage as well.

To apply for the loan modification plan, you will be asked to prepare an application and provide certain documentation.  You must be sure to complete your forms correctly so that you clearly demonstrate your ability to pay and maintain the new modified payment.  Your lender will base it's decision mainly on the information you provide to them, so make sure you do it right.  This could be the second chance you need to stay in your home.

Get help to apply and qualify for Obama's federal loan modification plan. You don't have to be confused or feel overwhelmed. You can get the help you need to understand the mortgage loan modification process by ordering and downloading The Complete Loan Modification Guide. This is a low cost, easy to read home edition loan mod kit that will provide you with everything you need to prepare a professional and acceptable loan modification application. You are provided with all of the necessary forms and given detailed directions on how to complete them properly. The Complete Loan Modification Guide will take you step by step through calculating your debt ratio, completing the financial statements, writing your hardship letter and then putting it all together to submit to your lender. Learn how to apply and qualify for the Obama plan. Get started today on the path to secure home ownership, order and download The Complete Loan Modification Guide.