Make Home Affordable Refinance Program Changes Eligibility Requirements For Easier Refinancing

by Mike Holman

The Make Home Affordable mortgage refinance and modification program was announced earlier this year as part of the 2009 stimulus package.  The idea behind this refinancing program was to enable some home owners who are having difficulty making payments on their house a way to refinance even though they wouldn’t normally qualify because their mortgage is worth more than 80% of the house.  With a little bit of help, hopefully these home owners can keep their house and get back on track.

Allowable Loan to Value ratio (LTV) has been increased to 125% from 105%

When this refinance program was first announced – it only applied to home owners who had a loan-to-value (LTV) ratio of between 80% and 105%.  This meant that if the value of your outstanding mortage (the amount still owing) divided by the value of the house was between 0.8 and 1.05 then you might qualify for this loan modification.  However, it appears that not many people have been able to take advantage of this program so the government decided as of July 1 that the criteria for loan modification would be eased to allow more home owners to get their mortgage refinanced.  The new rule is that the loan-t0-value (LTV) has to be between 80% and 125%.  In other words if your outstanding mortage (the amount still owing) divided by the value of the house was between 0.8 and 1.25 then you might qualify for this loan modification.

This is great news for home owners who didn’t have a high enough house value to qualify under the old rules but can now apply.  This article answers the question – Do I qualify for the Making Home Affordable Refinance program?

How do I calculate the Loan to Value ratio (LTV)?

Ok, so maybe math isn’t your strong suit.  Here are the steps to calculate your loan to value ratio to see if it falls between 80% and 125% which is what you need for this refinancing program.

Step 1 – Determine how much you owe on your mortgage

You should be able to check online with your mortgage provider or by telephone to see how much you owe on your mortgage.  Perhaps you get a statement mailed to you from your mortgage provider which will contain this information.  It’s important to note that you only want the amount of mortgage that you still owe.  This is not the original amount of the mortgage when you bought the house!

If you don’t have the exact mortgage amount in front of you then don’t worry – just estimate as best you can and verify the exact amount later.

Step 2 – Determine the value of your house.

This value should be the appraised value of the house.  I would suggest calling your mortgage broker to see if they can help obtain this value.  If you don’t have a proper appraisal then just estimate as best you can.

Step 3 – Do the calculation

The basic calculation is to divide the mortgage amount owing by the house value.  So for example if your house value is $300,000 and the amount owing on your mortgage is $312,000 then you should divide $312,000 by $300,000.  To get the percent then multiply by 100.  in this example the answer to $312,000 / $300,000 * 100 = 104% which is within the criteria of this program.

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