Mortgage Loan Modification or Refinance Plan – Which Option is Right for You?

President Obama’s federal loan modification program called “Making Home Affordable” is offering two basic programs for the struggling homeowners. The first program is the streamlined refinance program and the second one is the standardized loan modification program. One may be qualified for help under any of these two programs. Below given is the information regarding the program and how can you qualify for these programs.

The Home Affordable Refinance Plan is designed to help the homeowners who are present on their mortgages, but they are unable to refinance because of the reduction in their home value. This program will offer 30 to 15 year of term and it will be subjected to the closing costs and the current market rates.

Here are the eligibility requirements for the Home affordable refinance program

* The applicant can’t have delinquent for more than 30 days in the last 12 months.
* The applicant must be living in the home as his primary residence.
* Loan is controlled by the Fannie Mae or Freddie Mac.
* The applicant should be able to prove his income to support his new mortgage payments.
* The applicant owes no more than the 1255 of the home current value.

If a person meets the above all requirements than the federal loan modification refinance program is the best option for him. One should keep in mind that if his current loan has a negative amortization with low rate then his payment can increase. The main aim of this program is to offer chance to the homeowners to get a fixed interest rate loan. The home affordable loan modification plan has different requirement for the approval process. The home loan does not have to be serviced by Fannie or Freddie but one should meet some other criteria. Basic criteria to be met for the home loan modification plan.

Below given are the eligibility requirements for the home loan modification plan

* The applicant must live in his home as his primary residence.
* The principal balance must be less than $ 729,750 for a single unit building.
* The mortgage loan modification should not be originated prior to January 1, 2009.
* The current payment including the insurance, taxes, current payment and the homeowners dues must equal or more than 31% of the monthly income.
* The applicant must be able to prove his financial hardships.

If the applicant answer yes to the above all the items then he would be eligible for the loan modification plan. Lenders are more motivated to help homeowners under this program because they are paid by the treasury department for every qualified loan. One doesn’t have to be late on his payments to apply, but should show that hardships exists which cause future delinquencies.

Second loans are also eligible for the home affordable modification program. Here the interest rate can be reduced as low as 1% and some loan can be forgiven by the Treasury Department. To apply for the loan modification program, one will be asked to prepare an application providing less documentation. One must be sure to complete the forms correctly so that one clearly demonstrates his ability to pay and maintain the new modified payment. The lenders decision is mainly on the information which is provided to them. Thus one should assure that he is providing the right information.