Keeping Your Head Above Water

o many Detroiters have barely been holding on to their piece of the American Dream. Scraping together whatever pennies, nickels and dollars you could to make ends meet. It seems like the first of the month always comes too soon. 

Well, help has arrived, not a minute too soon. New legislation introduced by the Obama Administration makes it possible for you to refinance your underwater home loan and take advantage of the low interest rates.

Underwater mortgage holders who are employed can qualify for refinancing under this new legislation.  Lenders and mortgage companies can refinance your loan without an appraisal, which reduces closing costs.

Prior to this legislation, underwater homeowners who wanted to refinance were forced to bring thousands to the closing. The only option for underwater homeowners was to pay the difference between the amount they owed and the current appraised value.

Underwater mortgaged homes did not appraise for the balanced owed and therefore the homeowner was forced to pay the difference before refinancing. However, the new underwriting guidelines allow qualified homeowners to refinance the amount they currently owe without an appraisal.

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Therefore, the lender can refinance the full amount owed without you bringing in the difference to the closing. Of course, we would all like to see our principal balances reduced to the current market rate.  This would be a “perfect world” scenario.

Truthfully, we don’t live in a perfect world. So, if you cannot get a significant principal balance reduction, at least you can reduce your mortgage payment by refinancing into a lower interest rate. This means that if you owe $100,000 and your interest rate is 6.5 percent, your monthly principal and interest payment is $632.07.

Under the old guidelines, if your home appraised for $50,000 and you owed $100,000, then you would be required to pay $50,000 cash plus closing costs to refinance. Under the new guidelines, the appraisal is waived and you refinance the $100,000 for market interest rates, which are around 4 percent.

Your monthly mortgage payment would be reduced from $632.07 to $477.42, which is $154.65 savings. A savings of $1855.12 per year, and you will save over $55,000 in 30 years. Contact your home lender today to begin this process!

Our real estate market is beginning to rebound.  We are stabilizing our communities and prices are starting to increase. These are all good signs and shows that we are in a recovery period. 

Unemployment is decreasing and consumer confidence is coming back. Now is the time to refinance your under water mortgage and capitalize on the savings. Interest rates are between 3 and 5.5 percent. 

Therefore, if you have a mortgage with a higher interest rate then now is the time to strike while the iron is hot. Contact your current mortgage company or servicer with questions about this new program.  You must be employed to qualify for a refinance. You must be able to show proof of income.

Please feel free to contact me via email at jayesimpspon@realtor.com with any of your real estate questions or comments. 

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