Home Loans and Hope for Homeowners

The majority of home loans and the current economic recession have come to such a nadir that the federal government has stepped in with a possible solution. Hope for Homeowners, as the program is known, was developed by President Obama and implemented on October 1, 2008. Under this program, homeowners who are behind on their home loans or who may be in an upside-down mortgage have a chance for relief without the threat of foreclosure. However, lenders participate in this program on a voluntary basis and not every homeowner is eligible. Read on for 3 things you should know about this program:

How Is Eligibility Determined? If you are already behind on your home loan or if you are having trouble meeting your monthly mortgage payments, you may be eligible to participate in the plan.

Other requirements include:

The house must be your primary residence, not a second home or investment property;

You cannot make the monthly payments without assistance;

You have not been convicted of fraud or willingly defaulted on other debts within the past 10 years;

Your mortgage loan originated on or before January 1, 2008 and you have made at least 6 payments.

What Does the Program Offer? The program is a refinance of existing home loans that are in danger of going into default or foreclosure. The lender will refinance the loan at a 30 year, fixed rate FHA mortgage. This can help borrowers who are trapped in an adjustable rate mortgage situation and need a fixed rate of interest. It can also help make monthly home loan payments more affordable for consumers who have experienced a financial misfortune, such as a lay-off, that make it difficult to meet your monthly obligations.

What Costs Must I Cover? While this program does offer relief for consumers trapped in impossible home loans, it is not a free ride. You must be prepared to pay for several costs associated with refinancing your mortgage.

These costs include:

An upfront mortgage insurance payment of 3%, plus 1.5% annual mortgage insurance premium on your outstanding loan balance. This is usually rolled into your monthly home loan payment.

Closing costs on the loan. Your lender will provide you with a Good Faith estimate of these costs.

The equity and appreciation costs of your home must be shared with FHA. You will need to give up 50% of the equity in your home, and any appreciation value when you sell some day, to the FHA as part of this program.

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