HUD and FHA make another policy change to the Home Affordable Refinance mortgage program. This policy change, announced by HUD Secretary, Shaun Donovan, will allow homeowners who are upside down on their mortgage and home values an opportunity to refinance their first mortgage up to 125% loan to value.
The current Home Affordable Loan To Value limit has been capped at 105%, but with the continued decline of housing values in the US housing market, the Obama Administration has approved an increase in the Fannie Mae Home Affordable loan program to 125% loan to value.
Underwriting Guidelines and Features of the 125% Home Affordable Refinance
- First and foremost, you must be paying your mortgage payment as agreed for the past 12 months.
- Your home's value exceeds your mortgage balance which has kept you from being able to refinance to lower interest rates.
- If your loan to value is greater than 105% but less than 125% you will only be able to get a 15 year or 30 year fully amortizing mortgage. Interest only loan programs are not eligible for this program.
- You can only refinance with this program if your new payment will go down or you are refinancing from a more risky loan product such as a interest only mortgage or a adjustable rate mortgage.
- In order to increase a mortgage payment under this program (a result of going from a 30 year term to a 25 year term) you must not have had a late mortgage payment in the past 12 months or if you got the loan in past year have no late payments.
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