Home Loan Modification Vs FHA Refinancing Programs

Are you among the millions of U.S. homeowners hit the hardest by the current financial crisis in America? Are you concerned that you can't make your monthly mortgage payments anymore? If you're nodding your head, you need to hurry to a financial counselor today and ask about home loan modification vs. FHA refinance.

Loan modification and FHA refinance are helping hundreds of thousands of homeowners prevent foreclosure when they can't pay their mortgages. Which one is best for you depends mostly on who backs your loan. To learn about your loan insurer, call your lender and ask. Most loans are insured by the FHA, Freddie Mac, or Fannie Mae. None of these three organizations are actual lenders, but they insure the loans and guarantee the full amount of the loan. Doing this lessens the risk for lenders and helps borrowers get lower interest rates.

How can you tell apart an FHA loan and a Fannie or Freddie loan? From the outside, you really can't. There isn't much difference between the loans, aside from who happens to insure them. A lot of homeowners don't even know who insures their loan, and that's because they rarely need to know that information. When they do need it is when they want to modify their loan to decrease their monthly payments. If your loan is a Fannie or Freddie loan, then you could be eligible for President Obama's Making Home Affordable mortgage loan modification plan. If you have got an FHA loan, then you should look into the HOPE for Homeowners plan, which is a special FHA plan to refinance mortgages through equity sharing.

Refinancing with HOPE for Homeowners with FHA loans opens up the possibility of refinancing to thousands of individuals who didn't used to qualify under old refinancing laws. Decreasing house prices have caused a drop in the home equity that people hold, and that drop has made some unable to refinance traditionally. If they have lost enough equity that they no longer have 20% equity, they used to be unable to finance.

The Making Home Affordable plan, in contrast, is not a refinancing program. Instead, it is a loan modification program, which requires participating lenders to follow a standard procedure to lower homeowner's monthly payments to affordable levels. The plan includes $75 billion of incentives paid out to both lenders and borrowers for successfully modified loans. Modifying loans prevents foreclosure and stabilizes the economy as a whole.