Even if you have a conventional loan, you may qualify for mortgage assistance when you need it. In fact, many of the mortgage assistance programs created by the federal government are tailored specifically for individuals with conventional loans. Such programs can help you remain in good standing with your lender and stay in your home whether you are struggling to make payments or simply want to refinance.
Fannie Mae and Freddie Mac
Most conventional loans are considered conforming, meaning that they conform to the lending guidelines established by mortgage purchasers, Fannie Mae and Freddie Mac. Home loans that don't fall within the guidelines are referred to as nonconforming loans, usually loans made to borrowers unable to qualify for conforming loans. If you have a conforming loan, it is possible that Fannie or Freddie purchased your mortgage from your original lender. Whether your loan is owned by Fannie or Freddie can affect the homeowner help programs for which you are eligible. You can look up your loan on the websites of these organizations to find out if either institution owns your mortgage.
Home Affordable Refinance Program
If your conventional loan is owned by Fannie or Freddie, you might be eligible for the Home Affordable Refinance Program. HARP, a homeowner assistance program sponsored by the federal government, can help you lower your mortgage interest rate, which reduces your monthly payments. To qualify, Fannie or Freddie must have acquired your loan prior to May 31, 2009 and the loan-to-value ratio must not exceed 80 percent. You also must be current on your mortgage and have a good payment history for the past year.
FHA Short Refinance
If you currently have a conventional loan that is not owned by Fannie or Freddie, you might be able to refinance your mortgage into a new loan backed by the Federal Housing Administration. If approved, your lender is required to reduce your loan to less than 97.75 percent of the home's current value. You must be current on payments and occupy the home as your primary residence to participate in this program.
Home Affordable Modification Program
The Home Affordable Modification Program offers help to homeowners with either conforming or nonconforming loans. To qualify for HAMP, you must already be delinquent or in danger of falling behind due to a financial hardship; your loan also must have been originated prior to January 1, 2009. If approved, your mortgage payments reduce to 31 percent or less of your monthly income.
If you don't qualify for any of these programs, help still may available. Many lenders offer in-house loan modification programs to borrowers who are in danger of falling behind on their payments. Contact your mortgage servicer to see what assistance it can provide. Such options include a repayment plan to catch up on missed payments, a temporary forbearance or a modification. As a last resort, you might consider pursuing a short sale to prevent foreclosure.
- Bankrate: Conventional, VA, FHA Mortgage
- Making Home Affordable: Home Affordable Refinance Program
- Making Home Affordable: FHA Short Refinance
- Making Home Affordable: Home Affordable Modification Program
- NOLO: Avoiding Foreclosure: Basic Workout Options From Your Lender
- Making Home Affordable: Does Fannie or Freddie Own Your Loan?