No Equity? Underwater? I've Got a Loan for That!

Welcome to this week's post at the Ft. Wayne Mortgage Minder Blog!

I receive tons of questions from borrowers who, thanks to the real estate crash a few years back, have either NO equity in their home or are underwater.  They're also stuck in a rate that they would love to get rid of, they can't sell and they think they can't refinance.  Good news, dear readers, those days are gone.  Whether you have a conventional mortgage, an FHA mortgage or a USDA loan, there are refinance options for underwater borrowers!

I'll tackle USDA and FHA options in a future post, so if you have one of those mortgage types, check back in a week or two.  For now, keep in mind that the FHA & USDA program structures are very similar to the conventional option.  Now, onward for my conventional friends!

I want you to stroll down memory lane with me for a minute........ Remember when we were kids and how utterly bored we would get listening to our parents talk about things like: 

• The neighbors' yards....
• Which house was starting to look rundown....
• How much the neighbor's house sold for....

Boring convo's they may have been, these things had a direct impact on the value of their home and whether it would be a prudent time to sell or refinance and they knew it.  Appraisals are based on the selling price of homes within a specified distance from the home in question within the past year.  They're usually required in refinance loans and almost always required when you're buying.  If the neighbor's house sold for a super low price, or if Mr. Jones got foreclosed on, it can affect the value of your very own home.  Fair or not, my friends, it is how the game is played.

Do you see where this is going?  What I used to consider boring and gossip-y I now realize were everything but; these things had everything to do with the financial decisions in our very own home.  These are very important things to think about if you are considering a purchase or a refinance!

Now, consider this:

Imagine if hundreds of thousands of people across the US suddenly lost their jobs and couldn't pay their mortgages......

Imagine if foreclosures skyrocketed, even in neighborhoods that held their value for decades.....

No need to imagine, right?  We're living it RIGHT NOW.  Thousands of dollars in equity were lost instantly when the bubble burst, even for folks who had great credit and who hadn't even lost their jobs.  

People who had worked years to build equity in their homes to send kids to college, to apply to their retirement someday when they sold their homes and downsized - these folks lost thousands of dollars in equity, and all within minutes.

WHAT IS A HOMEOWNER TO DO?

Now for the GOOD News:

In the wake of the housing crash, the federal government legislated a special program for conventional lenders to help in that very situation.  This program is referred to as the HARP program (a.k.a., the Home Affordable Refinance Program).  There are many details to the HARP program that I will not get into here, but know this:  I am currently refinancing equity-strapped and underwater borrowers through this program.

Here is the KEY point:  under the HARP backing for a conventional lender, the value of your home does not matter.  Seriously!  Most do not do full appraisals - wouldn't that defeat the purpose of the intent to help the homeowner?  They do internal appraisals, sometimes called "desktop appraisals", sometimes called "property valuation reports".  Either way, it is a brief survey of value.  Now, remember what I said a minute ago: Value does NOT matter.  They are required to report a value but that number does not affect whether or not you will get a loan (some do have value caps but not all).  

Lenders DO have qualifying factors, this is not risky lending nor are lenders refinancing for just anyone.  I have listed bullet points minimum requirements from one of my lenders below and many of the standard requirements for mortgages do apply.  I'm not going to post a list of these since there are so many; but one, for example, is that you can't be going through the bankruptcy process.  Chapter 13 bankruptcy is a little different, though, and in many cases I can still help, believe it or not!  Chapter 7 and some of the other types you will need to wait awhile before you can refinance.  However every profile is very different, so email me and see if we can do anything for you.

Now, here's your checklist for the HARP 2.0 program.  I want you to keep in mind that many lenders have additional requirements, so don't be surprised if you find different information out there!  This list is from one of my more popular lenders with the HARP 2.0 program.

Do a mental check to see if you fit in to these criteria, then email me to see if I can help you out.  If you're not sure about some of these items, that's okay!  I can usually determine most of this information for my customers.  If you don't have a conventional mortgage - remember, I can probably still help you!

• Must currently have a conventional (Fannie Mae or Freddie Mac) mortgage.  That is, not FHA; not USDA; and your lender isn't a private lender.
• You must have been in your home prior to May 31st, 2009.
• You must not have had any lates on your mortgage in the last 12 months.
• If you have TWO mortgages, such as a 1st and a HELOC (home equity line of credit) or a standard 2nd mortgage - I can still help!
• Condos and second homes / vacation homes CAN take advantage of this program!

Thanks for taking a minute to read!  If you have general questions, post them below or click here to email me directly!  Please do not post any personal information such as social security numbers or phone numbers below in the comments section.  They are visible to everyone.  I will only take that information over the phone or in person.  On that note - emails reach me immediately, 24/7, if you have questions or to pre-approve you right away!

This has been Kari Peters with Ft. Wayne Mortgage Minder reminding you that knowledge is power, but knowledge of credit makes you downright dangerous!  Thanks again and see you next week!