Mortgage Help from Obama

The Homeowner Affordability and Stability Plan that President Obama introduced hopes to help homeowners modify mortgages that they cannot keep up with, and to help those who are unable to refinance their current mortgage because the value of their home has dropped and they now owe more than the home is worth.

For Homeowners who have kept current on their mortgages

Homeowners who owe up to 5% more than their home is now worth could be eligible. And there will be no prepayment penalties. But your loan must be owned or backed by Fannie Mae or Freddie Mac. (If your home value has dropped so much that you owe more than 5% more than your home is worth, this plan won't help you.)

Borrowers can get up to $5,000 applied against the balance of their debt if they make payments on time for five years.

The current price of a property will be determined once the refinance application process is underway. According to the White House, to be eligible you must have "sufficient income to make the new payment and an acceptable mortgage payment history."

All applicants will be closely examined by lenders and those who misrepresent their incomes will not qualify.

This plan won't reduce the amount of money you owe on your home, it will simply lower the interest so the payments are lower. Over the life of that loan, you will be paying less interest.

To be eligible:
• You must live in your house as a primary residency
• Your monthly payment must exceed 31% of your monthly gross income
• Your loan can't exceed the Fannie Mae or Freddie Mac loan limits ($417,000 in most areas)

The government is providing substantial incentives to both the lenders who modify loans and the borrowers who keep up with their monthly payments. Borrowers can get up to $5,000 applied against the balance of their debt if they stay current for five years.

If you're stuck with a mortgage that's wrecking your finances, here is what you should do:

1. Keep making payments: It's important to keep making your payments. Do not compromise your credit report and score.

2. Review your credit: Check your credit reports for errors. An accurate report can help speed up the loan modification process. If you find errors, contact the credit reporting agency that listed the error -- they'll have 30 days to address your request.

3. Look into refinancing: If you owe more than 80% of your home's value, you may be able to take advantage of the lower rates generally offered to homeowners with more equity in their homes.

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