Posts Tagged ‘Freddie Mac’

Maximum Debt to Income Ratio – Relief Refinance Mortgage

Relief Refinance Mortgage Plan Debt To Income Requirements

Many people know that the first parameter a lender will check when they go through your mortgage qualification request is the Debt to Income ratio. This DTI (Debt to Income) ratio parameter requirement  is one of the most important figures for processing the mortgage as the debt to income ratio has impact on the amount they will lend, the interest rate and the life term of the new mortgage.

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Home Affordable Refinance Program (HARP) was made to support homeowners to refinance their mortgage to better rates. Here are a few guidelines to help you swim through the refinancing debt to income issues.

Debt to Income Ratio Logic

The logic behind the debt to income ratio is to have some kind of ‘rule of thumb’ on how much from a persons income should the mortgage loan payments be. This ratio is quite easy to calculate, and helps the lender and the borrower know how much money per month the borrower can handle.

Each lender can have a different DTI figure on which they can decide how much money to lend, and how long to stretch the mortgage term. There are two kinds of debt to income figures, ‘front end’ and ‘back end’ DTI, they are calculated similarly but usually the Back-End Debt to Income is the figure the lenders look at.

Calculating the Debt To Income Ratio

In order to get a figure of Debt To Income, a person needs to add all the fixed mortgage expenses which are expected to be paid monthly, including private mortgage insurance, homeowner’s insurance and property taxes. Then divide this sum by the income (before taxes). This is the Front End Debt To Ratio, usually the small figure and some lenders will want to see it is lower than 30%.

The more relevant ratio figure is the Back End Debt To Income, this figure is calculated the same but on top of the mortgage expenses you need to add the all the monthly fixed payments you have, including car loan payments, student loan payments, revolving credit payments etc.. this is then divided by the gross income.

Back End Debt to Income has a higher percentage figure, as paying back debts of all kinds is a larger slice of the family income than the mortgage expenses alone. This is the real figure that needs to be related to when refinancing.

You may see both figures placed together like this: 29/40 This means Front End DTI = 29, Back End DTI = 40. In this example the lenders DTI limit requirements are that the mortgage expenses will not exceed 29%, and the over all family debt will not be higher than 40% from the gross income.

Relief Refinance Mortgage

As a part of the federal Home Affordable Refinance Program (HARP), Freddie Mac launched the Relief Refinance Mortgage program. This program allows people to refinance their mortgages with slight ease on some of the requirements, all intended to help people refinancing their mortgages after he 2009 economic crash down.

One of the factors that the Freddie Mac indicated they will give some relief is the Debt to Income ratio requirements. For the lenders the most safe course of action is to lower the ratio limit, and by that to make sure the borrower has enough free cash to pay back the loans. Freddie Mac new Relief Refinance Mortgage plan, allows a raise in the Maximum Debt to Income ratio, and making refinancing possible for more families and consumers.

Relief Refinance Mortgage – Same Servicer

Same Servicer – The Freddie Mac indicates that when the refinance request is processed by the same current mortgage lender (same servicer) the Relief Refinance Mortgage – Same Servicer does not have a maximum debt-to-income ratio requirement.

There is an exception if there is an increase in the monthly payments that exceed 20% in the new refinanced mortgage compared to the old mortgage, than the debt to income maximum limit (back-end) is set to 45%.

Relief Refinance Mortgage – Open Access

Open Access means the refinancing is processed by a new lender, and not the same one for the first mortgage. In this case by the Relief Refinance Mortgage guidelines each lender does it’s own assessment and can determine their own Debt To Income Limit requirement.

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Home Affordable Refinance Program HARP

Get The Most Out Of HARP Program

If you seem to find it difficult to be able to refinance your present mortgage or seem to be experiencing difficulties carrying out your obligations upon your existing home loans? If your answer is YES, play the HARP and don’t play on your money.

HARP – (Home Affordable Refinance Program) is a component of the 2010 Obama administration’s $75 billion Making Home Affordable plan. Provided for all homeowners who are not able to refinance their present mortgage or who seem to be experiencing difficulties carrying out their obligations upon their existing home loans.

 This Obama administration 2010 HARP mortgage support is an excellent chance only for people who have home loans operated through one of two: Fannie Mae or Freddie Mac.

Fannie Mae and Freddie Mac, are the two mortgage holders which the 2010 Obama administration federal government mortgage loans took charge of last year. Fannie and Freddie at the moment are chopping interest levels for home loans they utilize to well under 2.5%, together with the goal to help people buying a home to achieve a maximum of 31% of a person’s gross cash flow spent on mortgage payments.

How to qualify for Home Affordable Refinance Program ?

First you must check if your loan is owned or has been guaranteed by Fannie Mae or Freddie Mac?”

Ask your mortgage lender or service or call directly for Fannie Mae: 1-800-7FANNIE (8am to 8pm EST) For Freddie Mac:1-800-FREDDIE (8am to 8pm EST).

 Before applying check if you stand these terms of 2010;

 1. You are the owner-occupant of a one- to four-unit home.

2. The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac.

3. At the time you apply, you have not been more than 30 days late on your mortgage payment in the last 12 months; or, if you have had the loan for less than 12 months, you have never missed a payment.

4. The amount you owe on your first lien mortgage does not exceed 125% of the current market value of your property.

5. You have a reasonable ability to pay the new mortgage payments.

6. The refinance improves the long term affordability or stability of your loan.

Is Home Affordable Refinance Program for you?

You should not decide on new home loan simply on its yearly interest rate. Your decision to refinance a mortgage loan will need to merely be done in the long-term financial savings to be greater than the original costs. For you to determine your break-even factor, divide the price of the actual refi by your monthly financial savings. The new sum symbolizes the amount of months you have got to remain at your property to generate this type of tactic to succeed.

 Any home owner with a 30-year, $200,000 mortgage charging 8% interest would probably pay out $1,468 every month. Having a 6% interest quote, a person’s payments are going to be 1,199$ which will save you 269$, meaning your break even will be after 8 month. *Assumes $2,000 closing costs

 Banks are generally seeking for modifications which credit seekers could live with so appliers need to clearly show evidence of existing earnings as well as that the income will keep going not less than 9 months.

Even with the HARP program unfortunately for many typical unemployment compensations tend to be a component of six-month process, therefore they do not meet the criteria. Making this plan a saving rope for those who probably would have managed without it.