Homeowners may find it more difficult to refinance their loans
If you are lagging behind your mortgage payments and are getting all the papers ready to refinance your loan loan, then you better hurry! This is because it is likely to become very difficult to refinance your home loan in the near future. Glance through the article to know how it will become harder for homeowners to qualify for refinancing in the coming days.
Refinancing – More difficulties await for the homeowners
Several federal agencies have proposed new rules to the government. These rules will make it more difficult for the homeowners to qualify for refinancing. As per the new rules, homeowners need to have minimum 25% equity in their homes to qualify for refinancing. The homeowners interested to apply for cash-out-refinancing are required to have at least 30% equity in their homes.
The new rules state that the homeowners need to meet the credit-related guidelines so as to be eligible for refinancing. This will make the situation worse for the homeowners with poor credit. This is because bad credit mortgage refinance has ceased to exist nowadays. So, they will need to repair their credit for refinancing their loans. If they are not able to restore their damaged credit fast (which is very difficult thing to do), then they may get stuck in an expensive mortgage. The lender will charge a very high interest on the new loan even though the market rate is low.
The new rule will not come into effect till 2012. So, if you don’t have the required equity in your home, then it is better to not wait till next year. Gather all the relevant documents and apply for refinancing immediately.
A good option will be to go for the FHA (Federal Housing Administration) loans. This is because the new rules and regulations will not be applicable to the FHA insured loans. You don’t need to have large equity in your home to qualify for these loans. However, you’ll be required to purchase mortgage insurance.
You can also think about opting for HARP (Home Affordable Refinance Program) wherein you’ll be allowed to refinance around 125% of the home’s fair market value.
However, you can qualify for mortgage only when you are not delinquent on your loan. You’ll also need to owe more than the value of the house.
However, questions are being raised as to how the homeowners can take advantage of HARP in future. This is because the program is supposed to end on 30th June, 2012. This basically implies that homeowners will not able to get help of this program unless the date is extended.
Another option will be to take out a loan with mortgage insurance. This is because these loans are likely to be excluded from the new rules. However, it can’t be said for certain that the new rule will not be applicable to these loans. The final decision on this issue will be taken at a later stage.
Finally, a lot of consumer and real estate organizations are planning to object to the implementation of this new rule. They will lobby for the relaxation of the new rule for the benefit of the homeowners.
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