The government plans to explain details of the Homeowner Affordability and Stability Plan on March 4, 2009.  What we do know now is that it outlines three initiatives for owners of real estate in Denver and the U.S.A.

1. Refinancing program targeted for those without 20-percent home equity
2. Program to lower monthly payments
3. Support for low mortgage rates

The refinancing program is specifically targeted to people without 20-percent home equity—those who are not able to refinance because they do not have enough equity to qualify.  In order to take advantage of the historically low interest rates, this segment of homeowners is being thrown a life buoy.  According to an e-communication by Lori Richardson of Cherry Creek Mortgage Company, the people must be “creditworthy” and “responsible” folks who do not have 20 percent or who owe more than their home is worth.

These people will be able to refinance their mortgages into 30-year or 15-year fixed-rate loan products based on current market rates.  The provision is open to homeowners who have conforming loans which are guaranteed by Fannie Mae and Freddie Mac and who owe up to 5 percent more than their home is worth.  This could help homeowners reduce house payments by hundreds or thousands of dollars each year. 

There are limitations and fine print as usual including the exclusion of prepayment penalties and balloon payments.  We’ll wait for more information on March 4.

The purpose of the Stability Initiative is to reduce foreclosures and to stabilize home prices in neighborhoods.  It does not apply to investment properties, however.  Struggling homeowners who have wanted to sell their homes may be helped with this initiative.  Homeowners do not have to be delinquent to apply for this program.

As the homes have dropped in value, the initiative rewards lenders who help reduce the amount that borrowers must pay each month.  Lenders are encouraged to lower interest rates to as low as 2 percent or to reduce payments by extending the term of the loan.  They may also choose to lower the principal owed and the government will share in the expense. 

In support of low mortgage rates, the Homeowner Affordability and Stability Plan will increase funding to Fannie Mae and Freddie Mac to help maintain mortgage affordability for responsible homeowners and confidence in the mortgage market.  Many homeowners will hopefully be saved by these measures.

For more information about farms, horse properties, and real estate in the greater metro area, call Michael Paul of Realty Oasis at (303) 268-6052.

May we suggest enlisting the help of a Mortgage Planner before anything else?  A professional planner is like a GPS system that navigates the trek ahead, preparing buyers for preapproval for their Denver home loans.  Preapproval saves time, money, and disappointment. 

Even before contacting the Planner, buyers should opt out of trigger lists that sell personal information and credit scores.  The Planner reviews the buyer’s credit, helping to repair any potholes before the loan application is submitted. 

People journeying to homeownership should keep credit account balances low.  That means avoiding buying anything on credit that cannot be paid off in full each month, including vehicles. 

Potential buyers also need to be building reserves of savings and investments, saving up down-payment monies and closing costs along with three to six months of expenses.  Low reserves do not look stable to loan officers.  According to Dave Muti in Strategic Homeowner Magazine, “While most lenders will permit this amount to be held in retirement accounts, my recommendation is for this to be held in non qualified liquid assets without incurring any penalties.”

It is best to stay on the road, of course.  Some people have the habit of moving money around between accounts.  This makes it harder to document the source of the funds and could raise red flags about the applicant.  If buyers must change banks, lenders will require documentation including copies of statements from old banks, check, and deposit slips to cross reference.

Additionally, a steady employment history is best.  Lenders like tenure, longevity, and stability.  Anyone wanting to change jobs should consult with his/her Mortgage Planner.  The rule of thumb is that any job moves should come with more income or greater responsibility.  Lateral moves should be in the same industry and must be carefully considered.

Homeowners should sell their homes before buying the next homes.  It is better to rent for a while than to stress out over unforeseen problems that could come up while trying to carry two mortgages.

Starting early consulting with reputable Mortgage Planners helps buyers to analyze their goals, dreams, and finances.  When the time is right, the Mortgage Planners assist buyers to connect with the right real estate agents.  From then on, the ride should be smooth all the way to the destination.

For more information about homes, farms, horse properties, and real estate in the Mile High City, call Michael Paul of Realty Oasis at (303) 268-6052.