Mortgage Stimulus Program 2022 – 2023 | Mortgage Relief
The middle-class mortgage stimulus package
To Access the Mortgage Stimulus and See If You’re Eligibility Go Here
If you have Less than 5% in Equity in Your Home you should check out HIRO…
HIRO loan program replaced HARP, which was first enacted by Congress in 2009. HIRO helped millions of homeowners refinance their mortgages without the need for equity. A refinance can put serious money back into the pockets of middle-class Americans. Even if you need an appraisal, value doesn’t matter; you can get a lower rate without the need for a mortgage. Check Your HIRO Eligibility on the HIRO website to see how much you can still qualify for the program.
To start, verify your mortgage type
The GSEs, Fannie Mae, and F.M. deal with conventional loans, FHA, VA loans. The Department of Agriculture offers USDA loans. You can see if your mortgage is owned by Freddie Mac or Fannie Mae. The federal government has encouraged all lenders to support mortgage assistance due to hardship brought about by the coronavirus pandemic. If you have a mortgage problem, contact your mortgage lender to check out the details of how much money is going to be taken from your mortgage.
Congress Mortgage Stimulus Program – The Breakdown
The American Rescue Plan extends mortgage forbearance and the foreclosure moratorium till the end of June. This is since the pandemic was causing their income to become unstable, which brought on challenges in paying the mortgage. The CARES Act, passed in March 2020, was the first in the Congress mortgage stimulus program. The program is available for anyone that has a mortgage backed by the federal government. This includes HUD/FHA, USDA, VA, Freddie Mac and Fannie Mae loans. The deadline to apply for the forbearance relief was recently extended to 30 June 2021.
More homeowners are behind on their mortgages than at any time since 2010. Contact your mortgage loan servicer (the company to whom you send your mortgage payments) to get a forbearance. You can also ask your servicer whether your mortgage is federally-backed through Fannie Mae or Freddie Mac, for example, which are government-sponsored enterprises that back most federal mortgage loans. Alternatively, you can consider refinancing your mortgage to save money and make it easier for you to pay off your mortgage faster.
How To Request Mortgage Relief
Your mortgage servicer is likely not the same company that set up your loan. Not all mortgages offer the same relief, and there may be state or local assistance you can tap. Don’t rely solely on the knowledge of the agent to whom you speak. Do some research of your own online. You’ll find some links to help you find programs that may be tailored to suit your mortgage needs. Do not rely on the information from your loan servicer, it’s best to directly contact your mortgage company to get the best results.
Rental Forgiveness Program
Renters and landlords alike are struggling to keep their living arrangements and their property because of the pandemic. With so many renters in arrears due to loss of their jobs and livelihood, the government has passed legislation like the cares act tenant based rental assistance. Cares act housing assistance program Eligibility Requirements and Application Process. All overdue rent amounts must go toward rent that each renter owes to their landlord first.
Enhanced Relief Refinance Program
Mortgage relief programs are helpful for homeowners that are looking to make lower monthly payments on their mortgage. Freddie Mac’s Enhanced Relief Refinance program was created to assist borrowers with little equity to refinance at a lower rate and get to pay less monthly payments. The maximum loan-to-value ratio acceptable for the Freddie Mac program is 105%. This means that there should be no delinquencies within the last six months. If you have been working on your mortgage for 15 months and haven’t had any late payments, you are more likely to qualify for refinancing.
Cash-out Refinance vs. HELOC: Understanding the Difference as a Homeowner
Your house is an investment. Using your home’s equity may give you some extra funds, as well as help you reach your financial goals. Both a cash-out refinance and a home equity line of credit (HELOC) give you the option to borrow money against your place of residence’s available equity. But which option is right for you?
If you’re debating applying for a cash-out refinance vs. HELOC, read on to learn the difference between the two options and to help you figure out which route is best for you to access your home equity.
What Is a Cash-out Refinance?
A cash-out refinance is the act of replacing your current mortgage with a new one. When you refinance your home, the new mortgage may have more favorable terms, such as a lower interest rate or a lower monthly payment. Refinancing is a popular option to pursue when interest rates drop.
A cash-out refinance is essentially a new mortgage with a home equity loan amount higher than what you previously owed on your old mortgage. Once the home equity loan is disbursed, the difference between your new loan amount and current loan balance goes to your pockets. This allows any borrower to use their home mortgage to get some cash.
You must have built equity on your home in order to cash-out refinance, and you must usually leave 20% of the equity in the home if you are going with an FHA or conventional loan.
Here’s an example of a cash-out refinance at work:
Current Home Value: $200,000
Current Loan Balance: $100,000
Equity Left in the Home (20%): $40,000
New Loan Amount: $160,000
Cash out: $60,000
You will have to factor in closing costs when determining your maximum cash out, but this gives you a general idea. VA loans allow you to get a cash-out loan for 100% of the home value.
The money that you pocket from a cash-out loan is considered debt, so it is tax-free. Many homeowners commonly reinvest this money back into their homes, using the funds for renovations and other home improvements.
What is a HELOC?
Home equity lines of credit (HELOC) are a revolving source of funds that you can access as you choose. HELOCs usually feature variable interest rates, depending on the lender.
HELOCs have two phases: the draw period and the repayment period. The draw period is usually 10 years. This is when you can access your available funds as you choose, and as little or as much as you may need. During this time, you’ll most likely only be required to make small, interest-only payments against what you borrow.
If you don’t ask for an extension after the draw period, then you will enter the repayment period. Once in repayment, you can no longer access additional funds, and you must make payments to the principle, plus interest. The length of the repayment period varies, but most lenders have a 20-year repayment period. Depending on your lender, you may be offered different types of repayment options.
In general, HELOCs are a more flexible option if you’re uncertain of the amount of funds you’ll need. You can tap into the funds at any time, but you also don’t collect interest on anything that you don’t use. For this reason, many homeowners use HELOCs as a source for emergency funds. However, homeowners must be careful to not spend available HELOC funds on non-essentials, at least not without a solid repayment plan, as that may eventually lead to unmanageable debt. When the repayment period begins, unprepared borrowers may be shocked at the amount of their monthly payments and may fall on financial hardships because of it.
Cash-out Refinance vs. HELOC
Both a cash-out refinance and a home equity line of credit gives you access to your home’s equity, and, in both options, you’re free to use that money however you wish.
Whether it be to renovate your home, buy a second home, pay tuition, or undergo debt consolidation, both a cash-out refinance and HELOC may put you in a more competitive financial position and help you reach your financial goals.
Despite the similarities in terms of what you can use the money for, there are a few key differences between a cash-out refinance and HELOC.
These could influence which option you choose.
- Closing Costs: A cash-out refinance requires closing costs compared to the original mortgage, while HELOC usually has no, or low, closing costs.
- Loan Terms: A cash-out refinance sees you paying off your existing mortgage, whereas a HELOC is taken out in addition to your current mortgage. Therefore, it’s considered a second mortgage. A cash-out refinance results in a new payment amortization schedule.
- Disbursement of Funds: Through a cash-out refinance, you get an amount of money that’s paid at one time, which is the difference between your new loan and your current loan’s balance. A HELOC lets you withdraw as you need from your available line of credit during your draw period (usually 10 years).
- Payments: If you withdraw money during your withdrawal period, a HELOC will require you to make higher payments after the withdrawal period ends. A cash-out refinance is a lump sum and a new mortgage, so this does not apply to that option.
- Interest rates: Cash-out refinance interest rates can either be a fixed rate or an adjustable rate. HELOC usually has an interest rate that is variable, depending on the lender.
- Eligibility: Your eligibility for a cash-out refinance and HELOC both depend on factors such as your employment history, income, and credit score, and they may each require different qualifications.
Both a cash-out refinance and a HELOC gives you the ability to borrow against your home’s equity, which is a helpful tool for any homeowner.
Depending on your circumstances, how much money you need, and what you qualify for, you have options as to how to borrow against your home equity.
Choosing between a cash-out refinance and HELOC may be a difficult decision, so speak with your financial advisor to help you decide which option is best for you.
2021 Guidelines for Mortgage Rates and FHA Cash-out Refinancing
An FHA cash-out refinance allows you to tap into your home’s equity, and it’s more accessible than conventional loans. This is a great option for many homeowners, especially those who may not qualify for conventional loans but still want to take advantage of a lower interest rate.
But how does it work? Read on to learn more about FHA cash-out refinance, find out if you qualify, and discover the pros and cons of refinancing your home.
How does FHA Cash-Out Refinance Work?
A Federal Housing Administration loan (FHA) is a mortgage that is insured by the Federal Housing Administration. This loan is a great option for those who may not be approved for a conventional loan, as it has less restrictive qualification requirements. Your current mortgage does not have to be an FHA loan in order to qualify for an FHA cash-out refinance.
The way that a cash-out refinance works is that you get a new FHA mortgage that exceeds the amount owed on your current mortgage, then you use that loan to pay off your existing loan.
The difference between your mortgage balance and current home value is the “cash out.” You can refinance as much as 80% of your home’s value in order to cash out your equity.
Who Qualifies for FHA Cash-out Refinance?
An FHA cash-out loan allows homeowners with lower credit scores or a less than impressive debt-to-income ratio to access the equity of their home at a current low rate.
The basic requirements to qualify for an FHA cash-out refinance are:
- The home must’ve been refinanced but be your primary residence, and you must have lived in the home for at least 12 months prior to applying for the loan (additional documentation such as utility bills may be requested)
- You must have made on-time mortgage payments for the past 12 months prior to applying for the loan
These are the basic requirements, but there might be additional requirements depending on your circumstances, such as your credit score.
FHA loans usually require a debt-to-income ratio of 43% or less, but different factors may affect this, such as a high credit score or high home equity.
As mentioned, your current mortgage does not have to be an FHA loan to qualify for an FHA cash-out refinance.
How Much Can I Take Out with an FHA Loan?
To figure out how much you can take out with an FHA cash-out refinance, you must be aware of your maximum loan-to-value (LTV) ratio for an FHA cash-out loan, which is 80% for most homeowners.
This means that you can borrow as much as 80% of what your home is worth as long as you have at least 20% equity remaining.
Therefore, the amount of cash that you can take out depends on your equity. To get an estimate of how much you can take out, determine your equity, then subtract 20%. Factor in closing costs to get the best estimate.
Below is an example of an FHA cash-out refinance calculation:
Current Home Value: $400,000
Current Loan Balance: $250,000
New FHA Loan: $320,000
Paying off Current Loan: -$250,000
Max FHA Cash Out: $70,000
In this example, the homeowner’s maximum FHA cash out is $70,000, minus closing costs.
This is the maximum in an ideal scenario, not factoring in credit scores or debt-to-income ratio, which could greatly affect the maximum amount you qualify to borrow.
How to Get an FHA Cash-out Refinance
Do your research before you begin to consider an FHA cash-out refinance to make sure that you qualify and have everything required to apply.
Applying for an FHA cash-out refinance is similar to buying a home. There are similar considerations when it comes to credit, debt, and income, as well as an importance in budgeting and saving for the appraisal and closing costs in advance. This should be your first step in considering how much time you will need to prepare for an FHA cash-out refinance.
Take the time to bring up your credit score and save money for closing costs, if necessary. If you have a missed or late mortgage payment in the previous 12 months, you must wait until you have made 12 consecutive months of on-time payments to apply. Although FHA cash-out refinance loans are ideal for those with low credit, it is still a good idea to have a credit score of at least 600 before applying. Request copies of your credit reports if you suspect that your credit is not high enough.
Once you’ve decided that you would qualify for an FHA cash-out refinance, contact an expert before approaching your lender. Be sure to have your paperwork ready, including your current mortgage, documents outlining your other loans, as well as your income statements. Check with your lender to determine if you would require any additional documentation.
It’s best to have an idea of what you will do with the difference pocketed from your FHA cash-out refinance before you are approved and receive the funds in order to minimize impulsive spending.
Pros and Cons of Refinancing
Like with any loan, there are some pros and cons when it comes to an FHA cash-out refinance. This type of loan may benefit some, but it could be the wrong option for others.
- Using an FHA cash-out refinance, your home equity can be turned into cash that can be used to put you in a competitive financial position.
- An FHA cash-out refinance is a great option if you plan to reinvest it into your home by doing renovations or making improvements.
- It can be a great way to consolidate your high-interest debts, such as credit card debt, student debt, or car loans.
- By consolidating your high-interest debts, you’ll be able to build your credit score by reducing your credit utilization ratio.
- Since FHA cash-out refinance requirements are more lenient than those of conventional loans, FHA loans are more accessible, especially to those with low credit. The official minimum credit score to qualify for an FHA cash-out refinance is 500. However, be aware that lenders may look for a higher credit score. These loans also provide a higher maximum LTV than conventional loans.
- FHA loans are assumable, meaning that they can be transferred from an existing owner to another buyer after evaluation by the lender.
- There are some upfront costs, such as a new appraisal, a mortgage insurance premium, and general closing costs.
- FHA mortgage insurance payments are monthly and are usually for the life of the loan. Usually, you need to refinance to a conventional loan to cancel your FHA mortgage insurance.
- FHA loans must be used on your primary residence, as opposed to conventional loans, which can be used on second homes and investment properties.
- Getting started can be tedious. You will need to get your paperwork ready, such as your W-2 forms, income statements, bank statements, and more.
- In most cases, you can’t pull out 100% of your home’s equity.
Other FHA Cash-out Refinance Facts
Before pursuing an FHA cash-out refinance, here’s some additional information for you to know:
- In most areas of the United States, for 2021, the limit for an FHA loan is $356,362, but it can go up based on the area. Areas with a high cost of housing, such as Los Angeles or New York, have much higher FHA loan limits.
- You can add a co-borrower to the loan, but they have to live in the home that is being refinanced. Non-occupant co-borrowers are not allowed for FHA cash-out loans.
- The money you pocket from your FHA cash-out refinance is considered debt, and therefore non-taxable.
- FHA loans require a debt-to-income ratio lower than 43%, but with a good credit score or a large amount of equity in the house, this may go up to 50% depending on the lender.
- You can’t add a second mortgage to a cash-out loan, unless both loans add 80% of the home’s value or less.
- Although asset verification is not typically a requirement for FHA cash-out refinance, this does not mean that your lender cannot request these documents.
FHA Cash-Out Refinance vs. Other Loan Options
If you want to refinance your home but you’re not sure if FHA cash-out refinance is for you, you may want to consider an FHA Streamline Refinance. If you currently have an FHA mortgage, this refinance option may work for you. It does not require lenders to verify income or credit and it does not require a home appraisal. This type of refinance closes faster and often has cheaper closing costs associated with it.
The benefits of an FHA Streamline Refinance include:
- Lower refinance rates – FHA loan rates are usually low compared to most of the industry.
- Potential MIP refund – Those who use FHA Streamline Refinance may be refunded up to 68% of their prepaid postage insurance.
- No appraisal – This option cuts down on costs, and you may be able to use FHA Streamline Refinance even if your mortgage is underwater.
- No job or income verification – You may qualify for an FHA Streamline Reference even if you’ve lost your job.
- No credit check – It also allows those with low scores to potentially access lower interest rates.
If you’re not sure if an FHA refinance is for you, there are other options that may be beneficial to you, especially if you have a higher credit score. For example, an equity loan may be a better option for those who have more equity on their homes and who are in a better financial situation. Equity loans are typically second mortgages placed on top of your existing mortgage. FHA does not offer these loans, but they can be added to an FHA loan through a bank or credit union.
The two main types of equity loans are:
- Home equity loan: This is a loan in which you use your home equity as collateral. It comes as a lump sum of cash. You repay the loan with equal monthly payments over a fixed term, just like your original mortgage.
- Home equity line of credit (HELOC): This is essentially a revolving source of funds that you can access as you choose. HELOCs usually include a withdrawal period, where you can access as little or as much of your available funds as you want, followed by a repayment period that requires you to pay back the principal, plus interest. This is a great option for those who don’t know how much they need to borrow and require that flexibility. However, be prepared for potentially high payments during the repayment period.
You can also cash-out refinance with a conventional loan if you have higher credit. One benefit of conventional refinancing over an FHA loan is that you don’t pay mortgage insurance if you have 20% equity in the home.
Mortgage Rates 2021
Mortgage rates are at all-time lows right now. The average 30-year, fixed-rate mortgage is around 3%. FHA rates are even lower, and usually average around 10-15% below conventional rates. However, you must factor in FHA mortgage insurance, which may make the attractive rate almost comparable to that of conventional loans.
An FHA cash-out refinance not only gives those who would not qualify for conventional loans access to their home equity, but it also gives homeowners access to these attractive interest rates, which may lower their monthly mortgage payments and equal more savings in the future.
FHA cash-out loans are a great option for those who want to tap into their home equity but may not qualify for conventional loans, whether it’s due to a low credit score or a high amount of debt.
They give you access to a large sum of cash and an opportunity to take advantage of the current low-interest rates. However, if you have good credit, it may be more advantageous to take out a conventional loan.
Talk to your financial advisor to help you make the right decision based on your financial position and needs, and always be sure to shop around with a few lenders before committing to one.
How to Refinance Second Mortgages – Here’s What You Need to Know
Many homeowners refinance their mortgage at least once during the lifespan of their loan. If you already have a second mortgage, you may not have considered the possibility of refinancing your second mortgage. Refinancing second mortgages may prove to be beneficial for homeowners who are looking for lower interest rates and monthly payments.
Refinancing a second mortgage is generally similar to refinancing the first mortgage, but there may be different reasons to refinance again.
If you want to learn about refinancing your second mortgage, then read on. You’ll need to take some steps in order to refinance.
Why Refinance Second Mortgages?
There are a number of reasons to refinance a second mortgage. Many times, they may be different than the reason used to refinance the first time.
Some borrowers may refinance for lower interest rates, especially if those rates are significantly lower than when they took out their second mortgage, or if their financial situation has improved. This is a common step taken by people with improved credit scores.
The types of second mortgages people may want to refinance for lower interest rates include:
- Piggyback Loan: This is a home equity loan or line of credit that is made at the same time as your main mortgage. It allows borrowers with low down-payment savings to acquire loans for more funds to lower their loan-to-value ratio (LTV) and to qualify for a mortgage without paying private mortgage insurance (PMI).
- Home equity line of credit (HELOC): This is essentially a revolving source of funds that you can access as you choose. HELOCs usually include a withdrawal period, where you can access as little or as much of your available funds as you want, followed by a repayment period that requires you to pay back the principal, plus interest.
- Home equity loan: This is a loan in which you use your home equity as collateral. It comes as a lump sum of cash.
Another reason to refinance a second mortgage is to switch from a variable interest rate to a fixed rate. This is common among borrowers with piggyback loans; when someone with a piggyback loan refinances their second mortgage, they can combine their piggyback loan with their original mortgage under a single mortgage.
How to Refinance Second Mortgages
Refinancing a second mortgage requires almost the same steps as refinancing the first mortgage. In most cases, you’ll have to wait at least 12 months – from when you were approved for the second mortgage before refinancing it. Most lenders also require you to have at least 20% equity in your home. If you plan to refinance with a different lender, you may want to check with the lender who holds your second mortgage before pursuing refinancing.
It may be slightly more difficult to find a lender, as refinancing second mortgages carries more risk for the lender. If for any reason your house is foreclosed, the second lender only gets what’s left over after the first lender is paid off. Nonetheless, if you have good credit, a stable income, and you’ve made your mortgage payments on time, you should be able to find a lender willing to help you refinance your second mortgage.
Before considering refinancing any mortgage, you should do your research, speak with your financial advisor, and calculate whether you’ll benefit financially by refinancing. Depending on the fees, the cost of refinancing a second mortgage may outweigh the benefits.
Once you’ve decided that refinancing your second mortgage is the right choice, figure out if you would qualify for favorable interest rates by checking your credit score and assessing your financial situation. Your lender may look at your other debts, so determine your debt-to-income ratio.
If your credit score is too low or you have too much debt, you may want to consider waiting before refinancing your second mortgage.
From there, you will want to get your paperwork organized and talk to an expert before approaching your lender. Be prepared to present your current mortgage, documents outlining your other loans, and your income statements.
Once you’ve applied for refinancing your second mortgage and have been approved, be sure to review the terms of your contract before you sign.
Pros and Cons of Refinancing Second Mortgages
here are a number of pros and cons to consider when it comes to refinancing second mortgages.
- Change your existing loan rate and term: If interest rates have dropped, you may want to consider refinancing to take advantage of new rates.
- Lower monthly payments: Lower interest rates may also mean lower monthly payments on your house.
- Allow you to switch to a fixed interest rate: This is good for those who are at a variable rate and would want a fixed rate due to rising interest rates.
- Consolidate debt: Refinancing your second mortgage will give you access to more funds, depending on your home’s equity, that you can then use to consolidate high-interest debt, such as credit card debt or student loans.
- Consider the extended life of the loan: If you refinance a second loan, you will usually be prolonging the life of the loan and, therefore, be making payments longer.
- Cost: Refinancing can be costly, as you will need to pay, at minimum, an appraisal fee, as well as closing costs.
Refinancing a second mortgage may be the right option for you if you are seeking a more favorable interest rate or lower monthly mortgage payments. Refinancing a second mortgage is similar to refinancing a first mortgage; you will want to have a good credit score, employment history, and debt-to-income ratio to qualify for the best interest rates.
However, refinancing a second mortgage is not for everyone; although it may save you money over time, the fees associated with refinancing a second mortgage may not make it the most beneficial choice.
Talk to an expert before pursuing a second mortgage refinance to ensure that it is the best choice for you.