Home Affordable Modification Program (HAMP) – What You Need To Know

what is the hamp program

What Is the Home Affordable Modification Program (HAMP)? 

The Home Affordable Modification Program (HAMP) is an initiative created by the federal government to help people cope with the collapse of the housing market. Not just because of the problems in the housing industry but also due to the global meltdown of the economy many homeowners began to face problem in meeting their monthly debt obligations. 

Since the payment on a mortgage loan is usually a single biggest payment that a consumer is to pay, this loan is more susceptible to the default. The consequences of defaulting on a home loan are severe for the lender as well as for the homeowner.

Due to reduced income and loss of jobs that many people faced government launched the Home Affordable Modification Program in order to release some of the financial pressure that’s the borrowers were facing. 

The Home Affordable Modification Program (HAMP) is designed to assist people who are facing financial difficulties and are finding it difficult to make the current monthly payments on their mortgage and running the risk of foreclosure.

Eligibility for the Home Affordable Modification Program

In order to be eligible for this Program you must needs the following conditions.

  1. You are a home owner of one to 4 units property. 
  2. Have an unpaid balance on the mortgage. 
  3. Have a first lien mortgage that originated on or before January 1, 2009. 
  4. Have a mortgage payments that is more than 31% of your gross income. 
  5. Have a documented financial hardship to explain why mortgage payments are unaffordable 

If you meet all of this above criteria you can do a check online to confirm whether you are eligible for the Home Affordable Modification Program or not. The online check enables you to see your eligibility as well as tell you the procedure to follow next. You can complete an online application to confirm your eligibility which will require you to keep the details of income and debt handy.

Home Affordable Modification Program (HAMP) – FAQ

Do I qualify for the Home Affordable Modification Program?

The best way to find out if you qualify for the Home Affordable Modification Program is to contact your lender. However the eligibility criteria for this program, in a nutshell, are:

  • You are the owner of a 1 to 4 unit residence.
  • Your unpaid principal balance on the mortgage is no more than $729,750 for one unit, $934,200 for two units, $1,129,250 for three units and $1,403,400 for four units.
  • Your first mortgage was originated on or before January 1, 2009.
  • Your monthly mortgage payment is more than 31% of your monthly gross income.
  • Your financial hardship due to which you cannot afford to make your mortgage payment is documented.

Can you qualify for Home Affordable Modification Program if you are unemployed?

The answer is no. You cannot qualify for the Home Affordable Modification Program if you are unemployed. However, you can be eligible for the Home Affordable Unemployment Program which provides for a reduction or an entire suspension of monthly payments on a mortgage for a certain period of time. 

This reduction or suspension is temporary. If you lose your job while in the middle of the trial period for the HAMP program you can ask to be considered for the Home Affordable Unemployment Program. 

However, if you have already received a prominent loan modification and subsequently become unemployed, you will not be eligible for the Unemployment Program.

Can I qualify for Home Affordable Modification Program if I am already behind on mortgage payments?

The application for the HAMP program needs to be made when you see a foreseeable change in the conditions in the future that might prevent you from making your mortgage payments. This could be a reduction or loss of income in the future or a foreseeable increase in the interest rate of a mortgage loan. 

Such proof of foreseeable financial difficulty should be presented as a documented proof in order to apply for the HAMP program. If you are already late on your mortgage payments then the chances of you being able to apply and qualify for the HAMP program are difficult.

Will the interest rate change during the term in the HAMP program?

Under the HAMP program the interest rate is set at lower than the market rate and is fixed for the first five years of the modified mortgage. This modified interest rate then increases one percentage point every year until it reaches the current market rate at that time. The maximum market rate that the loan can reach is set during the time of the approval of the modified loan program. Your interest rate can never exceed this rate.

What is the cost of the HAMP modification program?

There is no cost associated with applying for ordering qualified for the HAMP program. Now lender has any right to ask you for any sort of a fee in order to qualify you for this program. Asking you for a fee to render such a service is a violation of the federal law. 

Several HUD approved housing counselors will provide this service to you at no cost. Any taxes that you owe will have to be which can also be included in the new modified mortgage payment.

Will the HAMP modification affect my credit?

The HAMP modification should not affect your credit score. As long as you have remained current on your mortgage payments before the modification and continue to make the payments on your modified mortgage while part of the program, your credit rating should not suffer. 

However, the lender will report the loan to the credit bureaus as “modified under federal government plan”. However if you have fallen behind on your payments before getting qualified for the HAMP modification then this will have been reported to the credit bureau by the lender which of course might affect your credit rating as all late credit payments do.

Has You Been Rejected For HAMP? Here’s What To Do Next

Have you been denied a HAMP modification loan? If you are wondering why and what to do next, here are your options.

  1. First of all, view your denial letter. This will shed some light on why your application was denied.
  2. Secondly, get together the pertaining document together carefully. These usually include pay slips for the mortgage, tax returns, bank statements, statements for other debs, income proof and statement and documentation of the financial hardship that you are facing. You will also need to prove that you mortgage payment is more than 31% of your income. Any missing document will result in a denial for the HAMP modification program.
  3. Thirdly, you should consider your alternatives. While HAMP is a federal government initiative and probably stands to provide you with the maximum benefit, there may be other lenders that also offer hardship programs. 

You can first look towards your current lender and see if he is willing to offer any in-house solution. Since it is in the best interest of the lender to see that you continue to make payments on your mortgage, he may be very inclined to help you. Many lenders have adapted hardship programs and offer it to their borrowers who are facing genuine financial difficulties.

Many lenders allow loan modification and whether you seek it from another mortgage lender or find an in-house loan modification program from your current lender, you will be able to modify your loan in any one or all three key aspects of the mortgage loan i.e. Interest Rate, Term and Balance owed.

Home Affordable Refinance Program (HARP) – What You Should Know

what is the harp program

What Is Home Affordable Refinance Program (HARP)

The Home Affordable Refinance Program (HARP) was an initiative launched the federal government in 2009 in the wake of the housing market collapse. This program was launched in order to help people cope with the issue of foreclosure. This program serves to initiate loan modification, refinance and provide foreclosure alternatives to homeowners. 

The Home Affordable Refinance Program also known as HARP in short helps homeowners to restructure their existing mortgage as an alternative to foreclosure. It enables them to lower the interest rate as well is monthly payments. This program is targeted to homeowners who need a financial reprieve from the high mortgage payments were unable to refinance you to their inability to accept a decrease in the value of the home.

Are You Eligible For The Home Affordable Refinance Program (HARP)

In order to be eligible for the home affordable refinance program you must have one to 4 units home, have a loan guarantee by Freddie Mac or Fannie Mae and the current on all mortgage payments. In case you need these requirements in contact your what age lender to get further details and to apply for this program. 

The paperwork and documentation required usually is: 

  1. the pay stubs of your mortgage payments, 
  2. a copy of your income tax return, 
  3. mortgage note and mortgage deed, 
  4. account balances on loans and credit cards, 
  5. second mortgage information, 
  6. insurance information and 
  7. your bank statements.

As it is a federal government process the approval period can be a lengthy even though the application process is simple and quick. The response time for approval can take several months.

FAQ For Home Affordable Refinance Program (HARP) 

Here are some of the frequently asked questions about the Home Affordable Refinance Program.

Will Refinancing through the Home Affordable Refinance Program (HARP) lower the principle balance?

When you refinance your mortgage through The Home Affordable Refinance Program the balance of the mortgage does not decrease. You will still owe the same amount of money to the lender as before. However, it is meant to offer relief to the borrower by lowering the interest rate for increasing the term of the mortgage or both. This means that your monthly payments might refuse but over the entire tenure of the loan you are still be paying back the same principle balance as before and perhaps even more on the cumulative interest.

How Do I Find out If My Mortgage Is Owned or Guaranteed by Fannie Mae Freddie Mac?

The easiest way to find out if your mortgage is owned by Freddie Mac or Fannie Mae you should simply ask your lender. They will be able to inform you if your loan has been guaranteed or backed up by either of these financial institutions. You may also contact Freddie Mac or Fannie Mae directly using a toll-free hotline number. Providing them with your loan identification number will enable them to access your account in their database and tell you whether they are handling your loan or not.

Can I qualify for the Home Affordable Refinance Program (HARP) if the current value of my house is less than what I owe on the mortgage?

The rules of the Home Affordable Refinance Program state that the amount you refinance has to be not more than 125% of your current value. Usually the process of appraising the value of the home happens once you apply for this program.

Can I Get Cash out with Home Affordable Refinance Program (HARP)?

The Home Affordable Refinance Program is meant to offer relief to people who can no longer afford to make payments on their mortgage and are facing the risk of foreclosure on their homes. It is the federal incentive to offer assistance to such borrowers. Cash out is a feature that allows you to borrow extra money by refinancing through the increased equity in the home for other expenses. Cash out is not possible with the Home Affordable Refinance Program.

Can I benefit from the Home Affordable Refinance Program (HARP)?

In order to get an estimate of what the benefit will be in your particular case of refinancing through this program you can ask your lender for a good fit estimate. You can also do a calculation yourself using one of the many online free mortgage calculators. You should appreciate the fact that while refinancing through this program will lower your monthly payments it might increase the cumulative interest at you’re a on your entire mortgage if the term of the mortgage happens to increase.

Cash Out Refinance – What You Need To Know

What Is A Cash Out Refinance

“Re-financing an existing mortgage in excess of the balance is owed on the present mortgage, is called a cashout refinance.”

  • The present balance due is calculated after adding the settlement costs.
  • The reason why you can refinance for a greater amount than due is if the value of the house has increased, in other words there is built up equity in the home.
  • This extra cash can be used for various needs such as paying for the remodelling of the home, paying for education of a child, a wedding or any other important expense.

Things To Know About A Cash Out Refinance

They Carry a Higher Interest Rate

People who need a cash out refinance on their mortgages are usually the ones who are falling short of money and are therefore considered a high risk. Historically, they are also know to default on their payments more than regular borrowers. Therefore, the lenders charge a higher rate of interest to make good their investment as quickly as possible.

Try and get the best interest rate possible. Remember, that the equity in your home is being liquidated. Increased monthly payments dictate that a cash out refinance should ONLY be considered for important expenses.

Some people consider refinancing to invest the money further in a place that pays a higher return. This is a risky thing to do. Avoid this manoeuvre.

A New Mortgage On A Fully Paid Off Home Is Considered A Cash Out Mortgage

If a homeowner takes out the mortgage on a property that is already paid off it is considered to be a cash out mortgage. The lender again assumes that the home owner is in need of money hence the rates are higher.

Portfolio Lenders May Be Flexible

Lenders who originate loans to hold rather than to settle in the secondary market maybe more flexible in their definition of what constitutes a cash out refinance. They may not view a second mortgage as a cash out if the borrower has had a loan for some time or if the loan has been used to improve the property.

Property improvement might also exempt a loan on a property with no mortgage. Borrowers should be prepared to document the improvements however.

imporant facts about cash out refinance

Cash Out Refinance Has Been Subject To Frauds

It is something that has been used to commit fraud by predatory home loan lenders in the past. The borrowers are roped in by the prospect of a sizable amount of money and soon enough find themselves with mortgage payments that you could draw a sizable interest rate. Some people have taken out cash out refinance on property that was fully paid for only to realize that the payment to be made on the mortgage was beyond their means of paying.

Cash out refinance has been subject to malpractice which is what happened with homeowners who bought houses with assistance from Habitat for Humanity who then went on to refinance the zero interest loans provided to them under the program into high rate loans in order to generate cash.

Always Work With A Reliable Lender

Refinancing a mortgage is a complicated and tricky affair. You want to be dealing with a mortgage lender who has ethical practices and will not cheat you with hidden costs.

Working with a well-established lender makes the lending process much easier and avoids the pitfalls of dealing with a lender with questionable business ethics. The last thing that you need is to refinance your current mortgage with a lender who is going to offer you unfavorable terms on the sly such as balloon payments.

Do your research on the mortgage lenders before you decide to refinance your mortgage with them. Ask for a reference from your friends and family as they may be able to provide you with a first-hand experience and recommendation for a mortgage lender.

Keep A Watch On The Liquidation Account

You will have to watch out for how much of the equity in your home you want liquidated. You can have it all used up to provide you with the maximum extra money or you can choose to liquidate only as much as you need. You will have to ensure that the value of your house is appreciated properly and fully to ensure full benefit of the increased value.

Alternative to A Cash Out Refinance

There are other ways to get some extra cash out of the built up equity in your home. 

On of them is the home-equity line of credit. This way you do not have to undergo the complicated procedure and the cost of refinancing. 

Home equity loan is ideal when you only want to tap a small amount of the equity that is built up in your house. 

If you do not need the money all at once or if you don’t need the money for very long, you can see our section on home equity loans. You should remember at all points of that pulling cash out of your property may increase your refinance mortgage interest rate.

Effect Of Your Credit Rating 

A good credit rating is essential to getting a favourable deal from the mortgage lender. In order to deal with a bad credit situation and yet qualifying for a cash out refinance, you can do the following things. Get a cosigner who has a stellar credit standing. Unfortunately, you will be hard pressed to find people to do this for you. Only very close and caring family members are viable candidates.

Secondly, you can explore the market for sub-prime lenders. These kind specialise in making loans to people with poor credit ratings. They used to flourish till a few years back but you will them greatly lacking in numbers today, due to the mortgage crisis. 

We have written a post on Sub Prime Mortgage, and mentioned the few major and reliable players that are still have tolerable credit requirement. Read that post here.

Cash Out Refinance Through The FHA

If you have sufficient equity in your home then you can also refinance your existing mortgage with a cash out refinance through the FHA, provided you can meet the guidelines which are more strict as compared to are no cash refinance.

Here are the guidelines laid down by the FHA for cash out refinance. 

  1. All borrowers on the cash to refinance must be residents of the home. 
  2. The mortgage must have been current at all times. 
  3. The loan to value ratios cannot exceed 85% and may be lower if you own a home for less than one year. This amount includes the combined total of your refinance mortgage amount and any subordinate financing including the home equity loans and lines of credit. 
  4. You should not have been late on the mortgage insurance payment in the last 12 months. 
  5. Holders of a second lien on the mortgage must agree to remain subordinate to the FHA mortgage refinance.

In order to get the latest guidelines regarding a cash out refinance through the FHA contact your FHA approved mortgage lender.

How to Speed Up Refinance Process

Tips to make the home loan refinancing process go faster and avoid delays.

If you are considering to refinance, taking quick steps to accomplish it may be important if you want to take advantage of the current financial situation. Here are a few ways if by which you can speed up your refinancing process.

Fill out the loan application properly

Fill out all the items in the application. Incomplete applications usually get neglected or delayed by the mortgage lender. If you do not know how to answer a particular question you can take the assistance of the loan officer rather than leaving a blank. Cross out any items that do not apply to you so that the lender knows that you have not overlooked or forgotten to fill them.

Attach all copies of required documentation.

Always include a copy of your latest pay stubs or give a copy of your two most recent tax returns in case you are self-employed. You should also always keep a complete copy of the entire application in case the original gets misplaced.

Make things easier for the appraiser.

In order to make the appraisals go faster you can get the complete floor plan of your house in case you have it. Provide copies of invoices for any improvements that you made the property since you bought it. This will help the appraiser reach a more accurate value of your home more easily and quickly. Since appraisal is just as important part of refinancing a mortgage as it is of purchasing one, this can help speed up the refinancing process.

Do not go chasing after multiple vendors

Putting into multiple refinance applications with multiple lenders can be a waste of time and money. Instead, use our earlier sections to how to narrow down your list of potential lenders and mortgage loan and target your effort in a focused manner. Decide on which mortgage lender you want to work with and pursue him to complete your refinancing process as quickly as possible. Also, if you happen to apply for a refinance during a busy time, waiting for results to come up with different mortgage lenders can take a long time.

Do not wait longer than necessary

Do not wait if you are ready to refinance now and you are already getting a good interest rate. Many people tend to get greedy and wait for the interest rate to go down a further notch or two. Interest rate can move in both directions. If you are already getting a good interest rate, waiting anymore could be a costly mistake.

2 Reasons To Refinance An ARM When Interest Rates Fall

Refinancing an ARM when the Cap Limit Is More Than Current Interest Rates

All good adjustable rate mortgage is come with a limit on the interest-rate. This is known as a Cap.

This is an interesting point of view which many people with adjustable-rate mortgages do not consider. Someone with a fixed-rate mortgage has no option but to refinance in order to take advantage of lower interest rate. People with adjustable-rate mortgages think that since there interest rate adjusts to the market rates anyway, they do not have to refinance when the interest rate for.

However, the one thing that borrows of adjustable rate mortgage is to not consider is that just like there is a limit on how much the interest rate can increase in a year, there is a similar limit on how much an ARM interest can decrease.

Let’s say that the interest rates decreased by 2%. You get notified by your lender that you’re monthly payment is going to come down to 1% since that is the maximum allowable limit that the interest rate on your adjustable rate mortgage can decrease in any given year.

This means that you cannot fully take advantage of the market rate and will have to wait for next year for the rate to decrease by another 1% but only if the low interest rates that are floating around today are still there.

You may console yourself by thinking that this is all right since your limit on the interest rate protects you both ways. If you cannot take full advantage of lower interest rate in the market, similarly you don’t get overly penalized by the interest rates go up either.

But imagine this scenario. Since interest rates have fallen, a new borrower can get the same adjustable rate mortgage as yours at 4.5% today. You, however, got your mortgage at 6.5%. This means that you will have to wait for two years before your interest rate can come down to the rate that is active today and that is also providing that the low interest rate continues to hold.

But if you were to refinance today at 4.5%, even if interest rates were to increase in the future and your rate would increase for 2% which is the worst-case scenario as allowed by the yearly limit on interest-rate increase, it would still be paying 6.5% which is what you’re paying today anyway.

Refinancing an ARM to Reduce Maximum Lifetime Interest Rate Cap

Another very interesting aspect to consider about refinancing an adjustable rate mortgage is that by refinancing to a lower interest rate today than what you originally got, you are bringing down the maximum ceiling on your ARM, adjustable rate mortgage.

All good adjustable rate mortgage come with a maximum ceiling on loans which is the maximum that the interest rate is allowed to increase throughout the life of the loan. This is in addition to the yearly limit which is how much the rate can increase in any given one year.

Let us consider an example where you took out your adjustable rate mortgage for 6.5% that comes with a maximum limit of 6%. This means that in the worst-case scenario, where the interest rate on your mortgage reaches its maximum, you could be a 12.5% on your mortgage loan.

However, if you were to refinance today to a lower interest rate of 4.5% of that same adjustable rate mortgage, you bring down the maximum interest rate to 10.5%.

Since the maximum limit on your adjustable rate mortgage is 6%, your adjustable rate mortgage is only allowed to increase up to that limit during its entire term which gives us 6% +4.5% that you qualify for today which equals to 10.5% as opposed to 12.5% of interest in the worst-case scenario. In this manner refinancing your adjustable rate mortgage can not only reduce the monthly payment but it can also cut down on the maximum risk that you face on the mortgage.

How Long Will It Take To Recover the Refinance Costs?

Calculate how long it takes to recover fee financing cost.

In order to calculate how long it will take you to recover the refinancing cost with your reduced monthly payment, the calculation is quite simple. You divide your refinancing cost with your after-tax monthly savings and that will give you the number of months in which he would break even. Using an example where it costs you $4000 to refinance and you save an after-tax $180 on your monthly mortgage payment, this simple calculation were $4000 divided by $180 gives you 22.2 months. This is how long it would take for you to recover those $4000 that you spend in your refinancing cost. After this whatever money is saved every month is pure savings. For example, in the next five years, which is 16 months you will recover $180 multiplied by 60 which equals two $10,800 minus the $4000 cost which gives you a saving of $6800.

Even in this example we have ignored state income taxes. Some states have significant income taxes and different rules regarding how this taxation is implemented. Be sure to factor in those lost tax savings into a refinance calculations as well.

12 Strong Reasons Why It Might Be Time To Refinance Your Mortgage

Reasons for refinancing a mortgage

There are many situations and reasons to refinance your current existing mortgage. Most of the people think that refinancing should only be done in order to reduce the interest rate on the mortgage and to cut down on the monthly mortgage payment. However, there are other situations as well which may need you to refinance your home loan. These are some of the common reasons why you can consider refinancing your mortgage.

To Reduce Payments

The primary reason why people refinance their mortgage is to take advantage of the lowering of interest rate in the mortgage market. By refinancing to a mortgage with a lower interest rate, you are able to reduce your monthly payment and save money. Refinancing to a lower interest rate can save you thousands of dollars over the entire term of the mortgage.

Refinancing For Lower Interest rate and to reduce monthly mortgage payments

Reducing  Lost savings for Tax Deductions to Calculate Actual Monthly Saving after Mortgage Refinance

How Long Will It Take To Recover Refinancing Costs From Monthly Savings

Should You Pay For Points When Refinancing?

To restructure your mortgage plan

Many people needs to refinance their mortgage even though there is no immediate monetary saving to be received from such a step. Such a situation usually arises when the borrower has a balloon mortgage coming to a close of its term when a large payment is due to the lender.

Refinancing this short-term balloon mortgage in order to avoid the balloon payment and refinancing it to a long-term loan can become an immediate priority of. In fact when many people take a second mortgage or use the 80 — 10 — 10 financing, they count on the fact of being able to refinance their mortgage when the time comes to make the impressively large balloon payment.

Another reason that people sometimes choose to refinance is to convert their adjustable rate mortgage into a fixed-rate mortgage. If the volatile conditions in the market is making you nervous and making you have sleepless nights worrying about for increase on the interest rate of your mortgage, you can choose to refinance to a fixed-rate mortgage for the peace of your mind.

Refinancing mortgage when you need to change the kind of mortgage you have

Refinance to Convert a Short Term Balloon Mortgage to A Long Term Mortgage

Refinance Mortgage To Convert an ARM to an FRM

When ARMs allow conversion to a fixed rate mortgage without the need to refinance

Refinance to Make Pay It Off Sooner

 

To Get Large Sum Of Money

Large expenditures such as a wedding, home improvements, college fees for your child etc may require an influx of a large sum of money. Many homeowners choose to refinance existing mortgage to take advantage of the built-in equity in the value of the home. If you have owned your property for some time, and the real estate market has been going well where the value of your property is more than what you purchased for, you can refinance your current mortgage in order to withdraw some of its built-in equity.

The longer you have owned your property for more equity it is likely to have built because of two reasons. If you have been making loan payments for a long time, the balance of the mortgage and hence your liability on the home has decreased. Number two, with the appreciation of the value of the real estate, the property of the house has increased. 

Refinancing for a Cash Out Mortgage

Refinancing for Improvements in the Credit Score

We have mentioned in the past that people who have taken a mortgage loan during the time that they had a bad credit rating may find that making regular payments on the mortgage has increased their credit rating. Other factors could also be responsible for your credit improving in the future. Having a bad credit rating might means that you will be able to qualify for a mortgage loan with a better interest rate and better terms and conditions.

Refinancing for Consolidating Debt

Refinancing a mortgage can also be used to consolidate unsecured and high interest debts such as credit cards. Since a mortgage loan has a lower rate of interest than credit card interest in most of the cases you will be able to pay off your high interest debt in one go and then have much smaller payments to make every month. 

The two important things to be considered in the scenario is that you are converting an unsecured debt into a secured debt which is backed up by your home. This can be a very risky thing to do. Secondly, you have to realize that even though your monthly payments may reduce you might be paying much more on interest over the entire term of the mortgage than you would if you just paid off your credit cards.

3 Questions Before Closing a Remortgage Deal

Three Basic Things You Should Know About Your Refinance Deal

Some very basic things that you should know about your refinance and ask your mortgage lender about before you sign on the dotted line.

What are the terms and conditions of the refinance contract?

You should fully understand the terms and conditions of the re-finance contract. This will help you gain full in sight on whether you are actually making a decision that is better than your current mortgage loan. There is no point in remortgaging if the new deal does not offer you substantial benefits. People have been known to make bad decisions when refinancing and landed themselves in a worse situation than before.

Learning more about you refinance contract will tell you if there are any kind of penalty fees associated with it if you decide to prepaid a home loan or resell before the home loan is over. If you are intending to stay in your house were short amount of time and foresee selling the house in the future credit is important that the mortgage lenders allows you to close the loan without charging you are heavy fees.

Is There a Promotional Interest Rate?

People have been known to sign on a refinancing deal thinking that the interest rates they are getting is a permanent interest rate whereas it stand out to be a promotional one that is only valid for the first few months of the first couple of years of the mortgage loan. Thing with promotional interest rates is that once the promotional period is over the interest rate can increase substantially and subsequently increase your monthly mortgage payments and making them unaffordable to the point where you risk facing foreclosure.

Is the Mortgage Lender Going to Resell the Loan?

In many situations a mortgage lender sells of the home loan to third-party soon after it has been approved. This means that he becomes only the service provider for the mortgage loan whereas a third-party owns it. This might make a difference in the future if you decide to refinance or need to modify the home loan. Because the current mortgage lender no longer owns the loan he will not be able to provide you with any direct services and will have to agree to the guidelines of the third-party corporation now owns your home loan. The result will be that you will have to deal with the entirely different entity through your mortgage lender in order to bring about any modification service changes in your home loan. If the mortgage lender offers some versus services, you might not be able to act upon them if he has sold the loan to third-party Corporation.

Problems with Applying for a Self-Employed Mortgage

Applying for self-employed mortgage can be problematic as you will find a lesser number of mortgage lenders willing to deal with the self employed people. In some cases it becomes a problem to verify a stable and regular income. In such a case the mortgage lender does not feel safe in giving out a mortgage loan. However, people who have a substantial income coming in from being self-employed will not find a problem in getting approved as long as they can establish a record of such payments over a substantial period of time in the past. If there is a history of getting events, even if the regular, mortgage lender will be able to get an average idea of the annual author monthly income of the self-employed person.

So what is important if you are a self-employed person and applying for a mortgage or a mortgage refinance loan is to be able to provide a verification of your income to the mortgage lender. Avoiding the lender with a statement of your bank account which receives your income will tell the mortgage lender if you receive a steady income from being self-employed or not.

Sometimes the problem does not lie in the amount you can but the inability or unwillingness of mortgage lenders to deal with self-employed people. The approval process can sometimes get stuck if they cannot verify your job or profession. This is especially true for people who pursue alternate areas such as being artists, writers etc.

Even so, you might have to try a little harder to find a mortgage lender who is willing to refinance your mortgage when you are a self-employed person.

Basic Steps for Remortgaging a Home Loan

When planning to remortgage a home loan this is the basic outline of how you should go about the process.

If you’re planning to remortgage it is a good idea to go about the process in a systematic step by step manner. In order to get the best remortgaging deal you need to consider several factors. By comparing the pros and cons of remortgaging in your situation you can come up with a carefully thought out solution to your remortgaging needs. Here are some of the basic steps involved in a remortgage.

Understanding Your Current Home Loan

Before you consider remortgaging your current home loan you should get to understand and know it properly. Certain features in your current mortgage may make the idea of refinancing non-lucrative. For example, most of the mortgage loan contracts have a clause that does not allow the borrower to refinance his mortgage before a certain period of time without having to pay heavy penalty fees. Even if there are no penalty fees there might be a prepayment charge for closing down a mortgage before the completion of the entire term. These charges and additional costs can sometimes be a deterrent to refinancing your mortgage, especially within the time period when the prepayment penalty fees are liable.

Shopping for a mortgage loan Refinancing Offers

In order to make refinancing your mortgage a reality you have to be aware of the offers that are available in the market. For example, it is usually advised to refinance home loan only if there is a difference of more than 2% between the new and your current mortgage home loan. Because refinancing a mortgage is like taking out a new mortgage loan you will have to take on additional costs such as processing fee, application fee and closing costs. Depending upon how beneficial a deal can get from a lender when you refinance and how much money you can save every month you will have to decide whether paying the additional closing costs is worth it or not. You also need to discover whether you can qualify for the offers that are available for refinancing from various mortgage lenders. There might be an offer to refinance your mortgage at a much lower interest rate but it may be only valid for people with a higher credit score than yours.
You need to get good faith estimates from the various lenders that you are shopping a mortgage loan from in order to get an idea of the complete costs involved in refinancing your mortgage. You cannot make a decision to work with a particular lender till you have got the entire picture of the costs involved.
Getting an idea of the offers are available with other mortgage lenders will also give you a leveraged to get a better deal out of your current mortgage lender in case he is not matching the offers which are available from other refinancing mortgage lenders.

Choosing Terms and Conditions of the Loan

Getting the lowest interest rate on a mortgage loan is not the only criteria for choosing a mortgage lender when you refinance. You may be trying to accomplish other purposes to refinancing as well such as getting extra income, paying off the mortgage faster etc. Based on all these features decide what kind of a loan you want to replace your current mortgage. For example, do you want a 20 year fixed rate mortgage for a 30 year fixed rate mortgage?

Close the Current Mortgage and Start Payments on the New Mortgage

After you have decided which mortgage lender to work with and found the right refinancing offer, you need to go through the complete process of refinancing which is similar to the process you went through when you took your first mortgage loan. There will be approval process, credit check and maybe even a property appraisal process. When the refinanced mortgage comes through you will have to close down your current mortgage by paying it off in full and start making payments on your new mortgage according to the new terms and conditions decided with your refinanced mortgage lender.