Learn about mortgage assistance programs sponsored by the U.S. government and non-profit agencies.
Given the complex nature of the home purchase process, many prospective homebuyers are relieved to learn there is mortgage assistance available from a variety of sources. The federal government provides many assistance programs, while nonprofit agencies provide several others.
The U.S. Department of Housing and Urban Development previously offered assistance to homeowners struggling to make monthly mortgage payments through the Hope for Homeowners Program. This program helps homeowners refinance their current mortgages into affordable Federal Housing Administration (FHA)-insured mortgages. The program was modified on May 20, 2009, when President Barack Obama signed the Helping Families Save Their Homes Act into law. Two programs fall under the new act, including the Making Home Affordable Refinance Program and the Making Home Affordable Modification Program.
Under the Making Home Affordable Refinance Program, approximately four to five million Americans will have the opportunity to lower their current mortgage interest rates. The program is specifically designed to help people who want to refinance but are unable to do so because their home's value has depreciated. Borrowers may be eligible if they meet the following criteria:
In order to be eligible for this refinance option, the borrower's first home loan must not exceed 105 percent of the property's value in the current real estate market, as determined by a home appraiser who will evaluate the value of the property after the refinance application has been submitted. The program does not apply to people who are currently delinquent on their mortgages or who have been 30 days delinquent within the last 12 months.
Those interested in the refinance program should contact a lender and specifically request information about the Making Home Affordable Refinance application process. Prior to making this phone call, it is helpful to gather pertinent information, such as monthly gross income, most recent tax returns, debt and second mortgage information, if applicable.
The Making Home Affordable Modification Program was designed to assist borrowers who are having difficulty paying their monthly loans or who have fallen behind on their mortgage payments. This program is available to borrowers who have loans that are not owned or backed by mortgage lenders Freddie Mac or Fannie Mae. To qualify for these loans, borrowers must meet five criteria:
This program is available to people who hold second mortgages; however, the program only applies to the first mortgage. Lenders may lower mortgage interest rates to 2 percent if necessary. Also, as part of this program, borrowers who make payments on time will receive financial rewards from the federal government, which are applied to the mortgage principal. Homeowners who are interested in this program should gather the same documents and information recommended for the Making Home Affordable Refinance Program. In addition, borrowers must write a letter explaining why they are unable to meet their current monthly mortgage payments.
The Neighborhood Assistance Corporation of America (NACA) is a nonprofit advocacy and homeownership organization that supports affordable home ownership in both rural and urban neighborhoods across the United States. Through NACA, homebuyers can obtain mortgages with low interest rates, no down payment, no closing costs, no fees and relaxed credit requirements. In order to be eligible for the programs NACA offers, homeowners must meet certain eligibility requirements, such as:
NACA has also played a pivotal role in bringing about legislation to protect prospective homebuyers from predatory lenders. While NACA does not exclude potential members based on income, it does set maximum purchase prices, which vary according to region.
ACORN Housing is a national nonprofit association that assists low- and middle-income families through one-on-one mortgage loan counseling, first-time homebuyer classes and lending partnerships. Specifically, ACORN links prospective homebuyers with loans that provide lower interest rates, no private mortgage insurance requirements, low down payments and low closing costs. Homeowners interested in this program must first participate in an intake appointment, followed by a one-on-one appointment. Homebuyers then attend a homebuyer seminar and finally obtain pre-approval. ACORN also helps borrowers who have fallen behind on their mortgage through the Home Equity Loss Prevention Program (HOME).
Federal tax credits, including the 2008 American Housing Rescue and Foreclosure Prevention Act and the 2009 American Recovery and Reinvestment Act of 2009, may be available to certain first-time homebuyers. Specifically, first-time homebuyers are eligible for a tax credit worth 10 percent of the home's purchase price. The tax credit has a cap of $7,500 for homes purchased in 2008 and $8,000 for homes purchased in 2009. Tax credits from purchases in 2008 must be repaid over the course of 15 years; however, most credits from 2009 purchases do not have to be repaid. For more information on the tax credits, visit the Internal Revenue Service (IRS) Web site.