The federal government announced changes to the Home Affordable Refinance Program (HARP) on Monday, hoping to allow more homeowners who are underwater on their mortgages to qualify for the program, and by re-financing and potentially reducing their monthly payments, making it easier for them to make their payments and assisting with possible cash flow problems.

The program, originally started in 2009, was supposed to help upwards of 5 to 10 million homeowners who are upside down on their mortgages refinance and take advantage of lower interest rates that are being offered for mortgages these days.  This would allow them to continue paying and stay current on their mortgage while freeing up some desperately needed cash for many homeowners who are struggling in today’s economy.

The changes announced on Monday are supposed to allow some homeowners who are currently ineligible for the existing HARP program to qualify- it includes the reduction of some of the fees associated with the program, as well as an elimination of the loan to value (LTV) restrictions previously in place as part of the HARP program.

What was/will be changed in the HARP program?

• A cap which limited those who qualified to those who owed no more than 125% of the value of their home will be lifted.
• Some fees for closing, title insurance, and other costs will be eliminated, lowering the amount of fees and expenses those hoping to qualify for the program will have to pay.

How do you know if you qualify for HARP?

• Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac, and must have been sold to one of those agencies on or before May 31, 2009.
• Loan To Value Ratio (LTV) must be greater than 80%- i.e., your mortgage must be at least 80% of the value of your home, and, as mentioned above, there is no longer an upper limit of 125% LTV.
• Mortgages that were refinanced over the last two and a half years aren’t eligible.
• Homeowners must also be current on their mortgage. One late payment within six months, or more than one in the last year would mean disqualification.

Will This Help Many Homeowners?

It certainly will let some who currently do not qualify become qualified for the program so it will help, but how many is probably anyone’s guess at this point.  Keep in mind, also, that this is a voluntary program for banks & lenders, so there is nothing that forces a bank to allow a homeowner to refinance, even if all of the conditions above are met.

As you can see from the requirement that only one late payment in 6 months is allowed in order to qualify, this program is still geared towards homeowners who are currently able to keep up with their mortgages and continue to make payments, even if they are underwater or “upside down” on their current mortgages.

By refinancing at a lower interest rate, homeowners will be able to reduce their monthly payment which in effect reduces the total amount they will pay over the life of the loan as well. Obviously, for someone underwater on their mortgage, the longer they plan on staying in the house, the better off they are, as over time the house will likely increase in value (although no one knows at this point how fast or slowly that will occur), and as they make payments over the years their remaining mortgage debt amount gets less and less, both of which increase the equity they have in the house vs. what the original purchase price was.

Hopefully, this will allow some of those people who are “hanging on” so to speak a little relief, which is definitely a good thing.

Obama Proposes Changes to Home Affordable Refinance Program (HARP)- Will It Help? is a post from: Think Your Way to Wealth a Personal Finance Blog Copyright 2008-2010

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If you are ready to become a homeowner, you’ve probably thought a lot about the house hunt. However, as you start your search to find the right home, don’t forget to look for the right loan as well. The financial strain of buying a home is often daunting, which is why there are government loan programs to help home buyers save money while making such a large purchase. One of these options may be for you:

VA Loans

If you or your spouse has served in the U.S. military, you may be eligible for a VA loan. Backed by the Department of Veterans Affairs, VA loans have flexible qualification measures and allow lenders to prepare mortgages for a greater number of borrowers. Eight out of ten VA loan borrowers would not have qualified for a conventional loan, so even if you’re worried about your credit history, this may still be an option for you. With the exception of a few parts of the country that have high costs of living, VA loans have a limit of $417,000 and must be used towards a primary residence (which does include farms). Their major benefits include:

• No down payments
• No required private mortgage insurance
• Lower loan interest rates, as compared to conventional loans

There are service length requirements in order to qualify, but if you are a veteran interested in buying or renovating a home, there is no reason not to explore this great option.

FHA Loans

Similar to VA loans, it’s easier to qualify for an FHA loan than it is for a conventional loan (and you don’t have to be a veteran). Insured by the Federal Housing Association, FHA loans are meant to give more Americans the option of owning their own home, and they have no maximum income limit so anyone can apply for one. You can finance up to 96.5% of your purchase price while still enjoying a minimum down payment of 3.5%, making it easier to start seriously looking for a home sooner, even if your income level is low. While FHA loan amounts are generally smaller than conventional loans, so are their overall costs, thereby saving you money. Closing costs are regulated by the Department of Housing and Urban Development and thus kept low, and the mortgage insurance premium is only 1.5%. FHA loans were designed to help homebuyers save money, and it may be the option you’re looking for.

USDA Loans

Another great, money-saving option is a USDA loan. To qualify, you have to live in what is considered a rural area (generally a population of 10,000 or less, but sometimes up to 25,000). There are also income limits, so they are not an option for all in the same way FHA loans are. If you do qualify though, you are eligible for some great benefits. USDA loans require no down payments, even if you want to finance 100% of your purchase price. They also do not require mortgage insurance, another great measure to keep more money in your pocket.

With government loan programs such as these, you can be savvy about your home purchase and save money in ways that conventional loans do not allow for. Don’t let your new home take a bigger toll on your wallet than it has to!

The following guest post is by Robert Stretch. Robert works in marketing for VA Mortgage Center.com

How to Save Money through a Government Loan Program in 2010 is a post from: Think Your Way to Wealth a Personal Finance Blog Copyright 2008-2010

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• Two Tax Deductions That Have Changed for Filing Year 2007
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• $6500 Tax Credit for Existing Homeowners Who Purchase New Home Signed into Law, Not Retroactive, $8000 New Homebuyer Credit Extended