There still remains greater than $10 trillion of untapped home equity stock. As fewer homes are sold, fewer loans are taken out to finance purchases and surviving mortgage firms are refocusing their market to getting homeowners to refinance. Lenders promote refinancing as a flexible option to reduce bills by lowering interest rates and stretching out payments. The problem with such a mortgage pitch is that it plays down or doesn’t disclose the fact that they are temporary. Critics say such an offer appeals to the same inclination that led many borrowers astray, living beyond their means.
Many borrowers made their first home purchase with just such program, a low 2-3 year fix rate, now becoming adjustable. With declining home sales and fallen home prices, many of these homeowners are faced with negative equity, increased monthly payment and weak savings. Depending on how long a borrower has owned their home, income, financial and credit history, there are considerable options before selling or foreclosing.
The first step is figuring out one’s financial options by a visit with your loan consultant. My loan consultant is Jesse Santana with PMZ Home Loans. Jesse is honest and informative. He takes as much time needed in explaining the benefits of the FHA Secure program over the fix period-ARM or even the standard 30 year fix and who would qualify for it.
The FHA Secure program is intended for homeowners with weak credit, no equity, their payment rate has become adjustable, they feel the effects of the increase and are behind by 1 late payment during the adjustable period. The borrower is qualified by showing in their income the ability to pay back the loan. The borrower has never missed or been late on his/her payment during the period in which the loan was fixed. If the borrower meets the qualifications, FHA Secure will loan up to 98% of the current market value of the home no greater than $362,720.
In a case where a home appraises for less then the owed amount the borrower might have to cover the difference. Where some homes were bought for 350K, are now valued at 320K, the borrower would need to repay the remaining $30,000 in order to transfer the 320K to the FHA Secure. For borrowers who don’t have such savings, they must rely on the loan consultant to help in diligently negotiating the remaining $30,000. Depending on individual cases and which lending institution, Jesse has negotiated for a lender to take a loss (meaning borrower is forgiven the remaining debt) or take special interest with deferred payments. The borrower needs to check with their tax advisor as to whether a gift is to be reported.
“Often times, the new payment comes out close to what the borrowers were paying in the fix. Though the process takes longer then a regular refi, because of the time it takes to negotiate the owed difference, average around 30-45 days.� Jesse informs me.
The FHA Secure loan should assist many homeowners and ease monthly payments here in Stanislaus County were the median home price is $315,500. With the FHA being a fix loan, it’s a great long-term solution for many families facing foreclosure. Most mortgage brokers and banks have made the FHA available to their clients or call Jesse Santana with PMZ Home Loans, he is happy to answer individual concerns.
Real Estate Answered is blogged by Cindy Chen, “Your PMZ Realtor�
For more information call (209)341-9073