Mortgage And Foreclosure Relief For Distressed Homeowners
by Chris Wozniak
(Cypress, California, Orange County, USA)
Ask Kate about mortgage and foreclosure relief for distressed homeowners: Kate, I was doing some research about the HARP program as this has just come to our attention. I ran across your web site and I got more information than the past 5 sites combined. Here is our situation.
We are in So Cal where the house values have jumped all over. We were looking to combine our first and second mortgage as we finished a home remodel in 2007.
We have always paid all our bill on time and we have good credit. No car payments but 30K in Credit card bills from overages on the remodel. No liens and no defaults or BK's.
Unfortunately, our home value is lower than 80-20 ratio due to the market. Before the remodel in 2006 the house was over $600K. Now with the remodel it is $500 or so. We owe 301K (6% fixed 30 year, 6 years in) on the 1st and 190k (prime minus .75) on the second.
The houses in the area are in the 500-580k range. However because of the complete remodel and upgrades, we don't fit within the comps, as there are no similar models based on rooms and baths. All you can match up is the square footage. I would think that we would be mid to high range based on upgrades.
We have a slightly smaller lot because we are at the end of a Cul-de-sac. We built out to the max that the city would allow. We went from 1100sqft to 1796sqft (single story). We added dual sinks in one of the bathrooms, we also went all "green" with new high efficiency AC, appliances, tank less water heated, window, instillation no roof, and many other cosmetic upgrades.
We are a single income family with a decent salary 95K base with bonus 110-125K, but then again we are in So Cal. My fear in looking at the HARP is that our debit to mortgage ratio doesn't exceed the 31% when you count only the 1st only using the HARP calculator. But when you combine both we are over the 31%.
The lender that we are talking to didn't mention anything about the income being a factor. They simply based it on the value of the appraisal. If the house was valued at 520k or greater, the rate would be 5%, 519-510k the rate would be 5.125%. That would save us $360 a month on the first only. Also the closing fees were estimated at $2400 as long as we didn't need a full appraisal (additional $550).
Not sure if this is totally correct but I was under the belief that it made sense if you were able to drop the rate by at least 1% and pay it back in less than a year.
I know that many factors come into play but what are your thoughts on this? To me the idea sounds good at first but if the income is a factor, do we still qualify? Are we wasting our time?
I'm also not sure if the interest rate is legitimate as well as the closing cost. We just don't want to waste time and money to only get no further ahead than when we started.
We would really appreciate your two cents as an impartial party. Thanks, Chris
Kate Answers: Mortgage And Foreclosure Relief For Distressed Homeowners
First of all, thank you for your kind words about my website.
Making Home Affordable Program, the Obama Administration's attempt at assisting distressed homeowners, addresses three groups.
1) The ones who can't avoid foreclosure.
2) Those who are wrestling with foreclosure.
3) Homeowners, like you, who are struggling to avoid joining the first two categories.
The Underwater Homeowner
You have a well-paying job but need to consolidate your 1st and 2nd mortgages into one affordable monthly house payment so you can afford to pay off your credit card debt accumulated during the remodel.
But and it's a BIG BUT, your home's appraised value is under water, meaning you owe more on your mortgages than your home's appraised value. Am I right?
Making Home Affordable Program
Enter HARP to the scene. Now the Making Home Affordable Program isn't perfect. It has cost US tax payers and angered a lot of citizens. But don't get me wrong. Without HARP and HAMP, many homeowners would be renters today and our neighborhoods even more flooded with empty homes.
So politics aside, I'm pleased our government is making the attempt. It's better than the alternative. But let's get back to your situation. In no particular order, I am going to throw out ideas to you.
Mortgage And Foreclosure Relief - Community Outreach Events
Get to a local community outreach event as soon as possible if your mortgage lender participates in them. Check their website for a schedule.
At these events, distressed homeowners sit face-to-face with employees who have been given authority to complete modifications that day
. People are driving hundreds of miles to attend.
If you are lucky enough to have a participating lender, take 100 percent of the paperwork they require to one of these events. This is extremely important.
HARP And HAMP Do Too Have Wiggle Room
Don't try to qualify yourself according to the Making Home Affordable website because in some cases, several programs can combine.
Don't write yourself out of the picture because you think you make too much money. I've seen exceptions. You'll notice the payment reduction estimator on Making Home Affordable website uses verbiage like "target" and "should be".
The FHA Short Refinance
Now your mind is reeling. You are wondering why Kate would think you have an FHA mortgage. Actually I assume you don't, Chris! In fact for this program, you can't.
Instead of repeating features and benefits of this newer program, I am going to send you to Ask Kate about FHA Short Refinance Option
for more information on HARP and HAMP.
Truthfully, Chris, I don't know if you'll qualify for FHA Short Refinance, but it's another arrow in the quiver, right?
Mortgage And Foreclosure Relief For Distressed Homeowners - The Rest Of The Story
Making Home Affordable Program has several offshoots to ask about. Besides HARP, HAMP and FHA Short Refinance, there are funds for Hardest Hit Housing Markets (HHF), which includes California, Principal Reduction Alternative (PRA) for homes with fallen values, modifications for FHA borrowers, VA borrowers (are you a Veteran?), and USDA borrowers.
Some of the sub-programs (my term) reduce or eliminate 2nd mortgages.
A word of caution. These programs can change without notice. Today's programs may be gone tomorrow. What I'm trying to say is don't take anything for granted. Take action today.
And make sure you are talking with a mortgage professional with authority, Making Home Affordable experience, and enough heart to exhaust all options on your behalf.
Shop And Compare Mortgage Rates And Closing Costs
Lastly, the HARP program does not restrict you to one mortgage company. So my best advice is to shop and compare mortgage closing costs
and mortgage interest rate lock agreements
Lenders set their own interest rates and even impose some of their own guidelines. So again, don't be afraid to shop and compare.
Go to my mortgage refi series
for more information on comparing mortgages. Be wise, ask questions, compare lenders and get EVERYTHING in writing.
Comment or Ask Kate
Chris, one more thing. Is this page is helpful to you? I'd like to hear back from you.
Comment here on Mortgage And Foreclosure Relief For Distressed Homeowners
. Or Ask Kate another question
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