Advice for Using Home Affordable Program

"Home Affordable" refinancing can create some economic relief in your household by lowering your interest rate to today's historically low levels. Do you know how to navigate through the Home Affordable funding process?

Just as distance runners may not feel certain aches and pains until after the third mile, the government's new mortgage program won't show its weaknesses until it's been thoroughly tested by the market. There hasn't been time to vet out all the problems, but one issue is already coming to the forefront: If you're interested in a Home Affordable mortgage refinance, be prepared to work for it.

Refinancing wheels turn slowly

The process of funding a Home Affordable mortgage refinance-or loan modification, for that matter-is anything but quick and easy. To avoid unpleasant surprises, you should understand the program's nuances before setting off on your refinancing journey. Here's what you need to know:

1.    Your existing mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. Use the loan lookup tools at FannieMae.com and FreddieMac.com to find out where you stand.

2.    If Freddie Mac owns your mortgage, you must refinance through your current loan servicer. This could be a sticky issue, particularly if you normally work with a mortgage broker. You won't have that option this time. There's one positive here, though: Freddie Mac is cutting back on fees and streamlining its processes to help more homeowners more quickly.  

3.    If Fannie Mae has a hand in your mortgage, you can work with your broker or shop around for the best mortgage refinance rate. Shopping around enables you to keep rates and fees as low as possible.

4.    Be prepared to document all aspects of your financial situation. The days of leaving questions blank on loan applications are over.  To fund your Home Affordable mortgage refinance, you'll have to document your income, assets, and debts. Start locating your pay stubs, tax returns, and debt and bank statements.

5.    Call your servicer first, and don't expect anything to happen quickly. Your loan servicer should be your first point of contact, even if Fannie Mae holds your loan. Inquire about how to proceed on a Home Affordable mortgage refinance. Provide whatever documentation is asked of you. Anytime you have to leave a message, ask when you should expect to hear back.

6.   If you fall behind on your mortgage payments, pursue a Home Affordable loan modification instead. The mortgage refinancing program allows you to refinance if your loan balance is between 80 and 105 percent of your home's value. The Home Affordable loan modification program is different-it's intended to help homeowners who are falling behind on their mortgage payments.

At the end of a long run, distance runners get to feel the high of a job well done. At the end of your refinancing journey, you'll be rewarded with a different kind of high-the kind that comes from having more money in your pocket by way of a smaller mortgage payment.