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  • So, you want a new home. However, you are a first-time buyer or you don’t have the financial resources to come up with a traditional down payment. What can you do? You can apply for a low down payment mortgage by purchasing a mortgage insurance policy. As discussed in our previous article, mortgage insurances reduce the lender’s risk because the insurance provider commits itself to covering the financial loss if the borrower does not honor the loan’s payments. This reduction in the risk of lending money for a home allows lenders to reduce their down payment requirements. There are two types of mortgage insurance: government insurance and private insurance.

    Government Mortgage Insurance

    There are three main government mortgage insurance providers: the Federal Housing Administration, the Department of Veteran Affairs and the Department of Agriculture’s Rural Housing Service. However, most of us can only apply for an FHA mortgage insurance, because the Department of Veteran Affairs and the Department of Agriculture’s Rural Housing Service mortgage insurances are restricted to veterans and farmers (or homeowners in certain rural areas), respectively.

    Private Insurance

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    There are many mortgage insurance providers in the private sector. In fact, most lenders either provide their own mortgage insurance or are associated with a mortgage insurance provider. It is a good idea to approach several lenders and ask for details on the mortgage insurance providers they work with and their fees. This applies for lenders who work with the FHA and with private insurance companies.

    The Cost

    The cost of mortgage insurance varies from one provider to another, from one region to another and by house type and cost. Typically the mortgage insurance of a property will represent 1 or 2 percent of the property’s buying price as well as yearly payments. Government mortgage insurance tends to be cheaper and have less stringent requirements. However, private mortgage insurance providers are required to stop the insurance once you pay for 20 percent of the mortgage balance. Government mortgage insurance providers on the other hand do not generally allow you to cancel a mortgage insurance until the loan has been repaid.

    The Bottom Line

    Mortgage insurances can provide borrowers with a way of paying for the down payment of a home. However, they do increase both the monthly cost of a mortgage and the overall interest paid on the mortgage balance. Therefore, only buy mortgage insurance if you cannot afford to pay a down payment. If you do have the cash for a down payment, there are probably few investments that provide a better return than reducing the balance of your mortgage and kick starting the equity on your home. 

    The typical down payment for a home is around 20 percent of the property’s purchase price. This means that if a property is worth $200,000, the down payment will typically cost $40,000. Unfortunately for most buyers, this figure is way beyond what most people can save for and give as a cash payment. Some people get round this obstacle by getting a second loan to pay the down payment, but not all lenders approve this and in any case this practice comes with problems of its own. What problems? Well if you have to take out two loans to pay for a mortgage and the down payment you could easily overstretch your household finances and default on one of the loans. Defaulting on a mortgage or down payment loan is very dangerous because they both use your home as collateral. This is a fancy way of saying that if you do not make the payments you will be forced to sell your home to pay your debts. Don’t think you have to miss too many payments for a lender to start the foreclosure process. If you do not show signs of repaying just one or two payments banks can start filing for foreclosure. Even if you manage to come up with the late payments, you will also be charged penalties and extra interest payments to compensate the lender. Enough said, large down payments are a financial hazard for homeowners.

    Ok, but what alternative do I have? I don’t have the cash to pay a 20 percent down payment, so what am I expected to do except find a second lender? Welcome to low down payment mortgages.  Yes, if you know where to look and who to ask you can find lenders who agree to sell you a mortgage with a down payment of only 3 to 5 percent. These mortgages are quite naturally called low down payment mortgages.

    Why do lenders offer such low down payment deals? As you probably expected, it is not out of the goodness of their heart or because they want to help you out. Lenders who accept low down payments do so because they find a way of protecting their investment using a special mortgage lending tool: mortgage insurance.

    Mortgage Insurance is a confusing term for many borrowers. Generally when you buy an insurance policy, the buyer is protecting himself from the potential loss of the insured property. However, in the case of mortgage insurance, the insurance buyer is not covering himself or herself but the lender. That means that if the lender cannot pay for the loan, the mortgage insurance will absorb the loss incurred by the lender. In other words, mortgage insurance protects lenders from the financial loss of a homeowners who stops paying his mortgage. This sharing of the lender’s risk between financial institutions and the mortgage insurance provider allows lenders to drop the interest rate they can offer their customers.

    How can you apply for mortgage insurance? There are two main methods, which we will discuss in our next article.

    The series of storms, tornadoes and flooding that have hit Alabama have caused thousands of families to lose their homes and increased the number that face foreclosure due to the financial and employment consequences of these disasters. The Housing and Urban Development (HUD) has reacted by announcing disaster assistance to victims. On April 29, 2011, Shaun Donovan, Secretary of HUD, stated he would speed the processing of federal disaster assistance to people affected by the storms in Alabama. This relief will come in the form of foreclosure assistance, Mortgage Help and other forms of financial assistance to families in the area. This article will look at some of the avenues HUD is using to allocate resources where they are needed the most.

    Foreclosure Relief

    Families affected by the storms will receive an immediate 90-day respite from any foreclosure and broader forbearance on mortgages with the FHA under foreclosure. This will grant homeowners a chance to arrange their finances and save their home from foreclosure.

    Mortgage Insurance

    Victims of natural disasters will also receive 100 percent mortgage insurance on loans they apply for to rebuild their homes or buy a new one. Banks and other lenders can apply to the FHA for up to 100 percent insurance on the loan’s balance including closing costs. The purpose, of course, is to stimulate the investment of money in the disaster area and help homeowners with the daunting task of rebuilding their home or finding a new one.

    Home Rehabilitation and Mortgages

    HUD also provides victims with mortgage insurance so they can finance their mortgage and the rehabilitation of their damaged home with a single mortgage. Effectively, HUD is covering the lender’s risk so that banks and other lending institutions are willing to offer loans to families who would otherwise not qualify for credit.

    Relocation of State and Federal Funds

    HUD provides states with Development Block Grants and HOME programs which are used for a variety of purposes. Communities and institutions in Alabama have been authorized to redirect these funds to cover the cost of emergencies and critical needs. The same institutions have also been granted with special authority to expedite the allocating of funds to speed up the repair and replacement of damaged homes.

    These are only some of the programs and aid resources available to victims of natural disasters. If you want to find out more about what programs you can apply for if you have been affected by the Alabama storms, tornadoes and flooding, click here. Programs you will find in this section include the Disaster Housing Assistance, the Reprogramming of Public Housing funds and Assistance from Ginnie Mae.

     

    After a slow start, Bank of America is embracing the federal government’s Home Affordable Unemployment Program and expanding the program to all regions qualifying for the federal Hardest Hit Fund. This extra help for unemployed workers could not come at a better time. Currently in the United States there are 13.7 million unemployed workers, according to statistics provided by the Labor Department. Unemployed workers are a specially vulnerable demographic among home owners who are at risk of foreclosure.

    The Hardest Hit Program

    In February 2010, the federal government allocated $7.6 billion towards helping states and regions which had been particularly hard hit by the real estate crash and the economic recession. These areas include, Florida, California, Michigan, Alabama, Arizona, Illinois, Georgia, Indiana, Kentucky, Nevada, Mississippi, New Jersey, North Carolina, Ohio, Oregon, South Carolina, Rhode Island, Washington, DC and Tennessee.

    Despite some promising figures in the last week of April (some 400,000 new jobs), there are still nearly 8 million workers who are on some kind of unemployment benefits. Until the unemployment issue improves it is difficult to see a long term solution to the foreclosure. In an effort to manage the increase in foreclosures among unemployed workers, banks such as BofA and Ally Financial are opening their unemployment mortgage assistance programs under the Government Home Affordable Unemployment Program to the areas that need it the most.

    The Home Affordable Unemployment Program

    The purpose of the Home Affordable Unemployment Program is to provide unemployed workers with time to find a job and reorganize their finances so they can afford their mortgage payments. The minimum period during which mortgage payments are suspended in this program is three months. During those three months, sometimes more, unemployed workers do not have to pay their mortgage and can concentrate their resources in finding a job. If you do find a job while in the program, you will be considered for HAMP, the Home Affordable Modification Program, which is designed to reduce your mortgage payments to 31 percent of your monthly income before tax.

    If you do not find a job a month before your unemployment mortgage assistance program ends you will also be considered for HAMP. If you are not accepted, BofA, or whatever bank you are using, will determine your eligibility for other mortgage assistance programs.

    Notice however that this program does not “forgive” mortgage payments during the three-month period. It simply suspends payments temporarily. These payments must be refunded once the program ends. There are two main ways to repay them: either by a single one-time payment or by increasing monthly mortgage payments until the debt is repaid.

    Are you interested in this program? Why not contact BofA and see if you qualify under the expanded program.

    The Emergency Homeowners’ Loan Program is still in its infancy and is still not available for homeowners. However, the program promises to provide help to struggling homeowners in exciting and innovative ways. Our previous article provided detailed information on the purpose of the program and how the program will work.

    In a nutshell, the EHLP (acronym for Emergency Homeowners’ Loan Program) will help homeowners who can’t afford to pay their mortgages due to a reduction (due to no fault of their own) of their income. The loan will help pay for the difference between the mortgage payment and 31 percent of the homeowners’ income for up to 24 months. The loan will also cover any late mortgage, tax and insurance payments. The maximum loan amount for any given borrower is $50,000.

    Who Will Qualify For EHLP’s Loan?

    – Income Reduction.

    To qualify your income must have suffered a reduction of at least 15 percent due to unemployment or a reduction of work hours. It is vital the reason for your separation from your employer is lack of work or some other reason where you are not at fault. If you lose your employment due to negligence or voluntarily, you will probably not qualify for the program.

    Income Maximum

    Only households who had an income of 120 percent (or less) than their Area Median Income before their income was reduces may qualify for a EHLP loan. The area median income is calculated by HUD for each region. By definition 50 percent of all households earn less than the AMI and 50 percent earn more than the AMI.

    Delinquency

    You must be at least three months behind in your mortgage payments to be eligible for a EHLP loan. This is one of the most controversial terms of the program because it may encourage homeowners to miss payments even if they have the savings to cover their mortgages in order to qualify for the program.

    Risk of Foreclosure

    Only homeowners who have been warned by the lender of their intention of foreclosing on the mortgage may qualify. In other words, this is a last resort program designed for those who are likely to lose their homes without mortgage assistance.

    Residence

    You must be living in the property at risk of foreclosure to qualify for a EHLP. This is not a program for rental and vacation homes. You will need to meet this requirement at the time of applying and for the duration of the program.

    Have you heard about the new federal mortgage help program? We are talking about the Emergency Homeowners’ Loan Program (EHLP) managed by HUD. Although this program is still in the development stages, it could prove to be such a huge help for borrowers we feel you should know what information HUD has provided up to now about this exciting new program.

    Goal

    The goal of the Emergency Homeowners’ Loan Program is to to help homeowners who are struggling to pay their mortgages due to a drop in their income of at least 15 percent because of unemployment or underemployment due to no fault of their own. This means that unemployed workers who were laid off due to lack of work or whose hours were reduced may receive help with their mortgage payments.

    How Will The Program Work?

    The main tool the EHLP will use to assist homeowners is to grant eligible homeowners with a bridge loan of up to $50,000 to pay for up to 24 months of monthly payments, as well as delinquent mortgage, tax and insurance payments.

    Under this program, borrowers must use 31 percent of their income to pay for their mortgage and the EHLP will pay the balance. However, the minimum payment for any homeowner is $25. The program will cover for arrearages and monthly payments for up to 24 months or until the loan reaches $50,000, whatever happens first.

    Repayment

    The beauty of this program is you do not have to repay the 5-year term loan, just as long as you regularly pay your monthly mortgage payments. Every year the balance of the loan drops by 20 percent, so by the end of the five years the balance will be extinguished if the borrower has followed the mortgage payments schedule.

    Which States Will Qualify?

    The EHLP program will be exclusive for states with a high unemployment who are not benefiting from funds by the Treasury’s Innovation Fund for Hardest Hit Housing Markets. This includes the following 32 states:

    Alaska

    Arkansas

    Colorado

    Connecticut

    Delaware

    Hawaii

    Idaho

    Iowa

    Kansas

    Louisiana

    Maine

    Maryland

    Massachusetts

    Minnesota

    Missouri

    Montana

    Nebraska

    New Hampshire

    Mexico

    New York

    North Dakota

    Oklahoma

    Pennsylvania

    Puerto Rico

    South Dakota

    Texas

    Utah

    Vermont

    Virginia

    Washington

    West Virginia

    Wisconsin

    Wyoming

     

    Eligibility

    The next article will look into the eligibility criteria of the EHLP program as specified by HUD. Notice that this program is still in development and the program’s terms could change at any moment.

    The main state government housing agency in New Mexico is the New Mexico Mortgage Finance Authority. This Agency cares for all housing departments and programs, including state and federal housing programs. One of the goals of this Agency is to help homeowners avoid foreclosure and protect their homes.

    In these difficult financial times homeowners are struggling more than ever to make their mortgage payments. The MFA has provided specific advice for New Mexico households which includes a set of steps you can follow to avoid foreclosure. None of these steps are, sadly, fail-proof. In some cases, homeowners can no longer afford buying a home and must look into alternative ways of dealing with their mortgage and look for other sources of housing. The MFA can help whether you think can save your mortgage or whether you need help finding the most graceful and financially efficient way out of your mortgage.

    Step 1. The first think you should do is contact your lender. Your lender is ultimately the agency which will approve or deny a loan modification, refinance or other type of mortgage settlement. The sooner you contact your mortgage provider the more options you will have. Some mistakenly believe that talking to your lender will accelerate a foreclosure process. The opposite is true. Mortgage providers will start their foreclosure procedures as soon as you are late for your payments. If you contact them before this happens you may receive the help you need so you never have to fall behind in your mortgage payments.

    Step 2. Steps 2 and 3 work together. As soon as you have contacted your lender and explained your situation, the lender’s loss mitigation department will start to analyze your financial situation and what is the best option for you and the lender. You should do the same. Find out what programs you qualify for and what you need to qualify. The main federal program for the protection from foreclosure is the Making Home Affordable program.

    Step 3. Talk to a certified mortgage counseling agency. The federal government sponsors these agencies to provide free or low-cost advice to struggling householders. We include a list of the mortgage counseling agencies currently available , their service area and contact details. Notice that the MFA works with the United South Broadway Corporation and the ILRC Housing Division.

    PARTICIPATING HOMEOWNERSHIP COUNSELING ORGANIZATIONS
     
    Clovis Housing Authority 

    Curry County

    Waymon Dowdy

    575-769-7902

     

    Community Action Agency of Southern New Mexico – 

    Las Cruces   

    Dona Ana, Grant, Hidalgo, Luna, Otero and Sierra Counties
    Shelly Almaguer

    Kena Carriere

    575-523-1639

     

    Eastern Plains Housing Development Corporation  

    Chaves, Curry, DeBaca, Eddy Guadalupe, Harding,  Lea, Quay, Roosevelt & Union Counties   

    Sandra Hidalgo

    Monica Moncada

    575-763-8335

     

    HOME New Mexico (MFA Helping Hand Loans)   

    Bernalillo, Sandoval and Valencia Counties – may also be able to serve other areas   

    Elena Gonzales

    Elaine Leal

    505-889-9486

     

    Homewise   

    Rio Arriba, San Miguel, Santa Fe and Taos Counties   

    Michele Lis

    505-983-6214

     

    Las Cruces Affordable Housing, Inc.   

    Dona Ana County– may also be able to serve other areas  

    Virginia Bell

    575-527-5648

     

    Navajo Partnership for Housing  

    Bernalillo, Cibola, McKinley and San Juan Counties   

    Lavera Thompson

    575-722-0551

     

    Southwest Neighborhood Housing Services, Inc.  

    Bernalillo, Sandoval and Valencia Counties – may also be able to serve other areas   

    Robert Garcia

    505-243-5511

     

    Region VI Housing Authority

    Chaves, Eddy, Lea, Lincoln and Otero Counties   

    Kelly Leflar

    575-622-0881 ext. 25

     

    Santa Fe Community Housing Trust  

    Santa Fe County    

    Nellie Martinez

    Ron Chavez

    505-989-3960

     

    Tierra Del Sol Corporation   

    Dona Ana County   

    Art Marrujo

    575-541-0477

     

    United South Broadway Corporation 

    Bernalillo, Sandoval, and Valencia Counties   

    Tim Gardener

    505-764-8867

     

    YWCA – Consumer Credit Counseling Service  

    Dona Ana and Otero Counties   

    Dolores Rosell

    575-532-1222

    The New Mexico Mortgage Finance Authority is the main agency responsible of improving access to housing for low to moderate income households in New Mexico. Although not run directly by any government agency, it is an agency of its own which uses both taxes and alternative sources for its everyday management, it is responsible as the state’s official housing agency for over 35 programs, which provide help and assistance to homeowners, the homeless and families that need help finding their first mortgage.

    The New Mexico Mortgage Finance Agency was first created in 1975 by the state legislature as a tool to distribute affordable mortgages to low and moderate income families. The funds for these mortgages, or more accurately the insurance for these mortgages, was generated by the sale of tax-exempt bonds. However, since 1997, the New Mexico Mortgage Authority also became the state’s housing agency, which brought under the same roof all housing departments in New Mexico. Now the MFA is responsible for all housing programs including section 8 and other federal projects. The Agency continues to be managed without any funds from the state, although it does manage programs which rely on federal taxes for funding.

    The growth of the MFA from its humble beginnings in 1976 is noteworthy. When it started in 1976, the MFA had two employees, in 2008 it had 66. It started selling $20 million in bonds a year, now it sells over $214 million.

    The services offered by the New Mexico Mortgage Finance Authority include:

    First-Time Home Buyers Loans.

    The Agency offered $221 million to over 1,700 first-time buyers in New Mexico in 2008. These loans allow low to moderate income households to qualify for loans to finance their first home.

    Down Payment Assistance

    The Agency also helps households find the funds to pay for down payments and other mortgage expenses. In 2008, the MFA distributed $4.6 million in down payment assistance and grants. The difference between a grant and assistance is grants do not have to be paid back as long as certain requirements are met by the borrower.

    Construction of Homes

    The MFA does not only provide funds for mortgages, it also gets involves in the construction of rental and homeownership homes. In 2008, the organization invested $53 million in the construction and maintenance of over 1,400 homes.

    Rent Programs

    Households who cannot at this time afford to buy a home can also receive help to pay for rental expenses. In 2008, the MFA granted over $22 million towards rental assistance programs in over 5,400 rental units.

     

    Pennsylvania Foreclosure Help

    The state of Pennsylvania Housing Finance Agency and the US Department of Housing and Urban Development (HUD) have approved counselors who can help you free of charge to access programs and services for homeowners in danger of foreclosure. Pennsylvania Foreclosure Help is not just something that is important to keep our People in their Home during this housing crisis.  The Pennsylvania Mortgage Help Hotline is 1-8669845108. This way you are sure that the counselors you choose can really provide the help you need to evaluate your financial situation, explain the available options and work with your lender to arrive at a viable solution. So don´t leave your home-stay and call the hotline for help without delay.

    The longer you wait and the further behind you fall in mortgage payments the harder it will be to catch up. If you don´t get up to date with mortgage payments your lender could be allowed to sell your house to pay off the debts and this is a situation that too many, who find themselves in financial crisis have to face.

    One of the programs is HEMAP Homeowners Emergency Mortgage Assistance Program from which thousands of families have gained much needed help. This is the only program of its kind created by Act 91 of 1983 to prevent homelessness among the citizens of Pennsylvania and funded by state appropriations and repayment of existing HEMAP loans. The program assures regular mortgage payments making it possible for the house owners to look for employment or train for other work or receive needed education.

    This program is in fact a loan which must be repaid and it is not available for FHA Title II (purchase) mortgages. Those who are approved for HEMAP have the property in danger of foreclosure secured by a mortgage so creating a loan. There are two types available according to the financial situation of the owner. These are continuing mortgage assistance loans and non-continuing mortgage assistance loans. Those qualifying for a non-continuing mortgage loan have their mortgage brought up to date from which date the owner is responsible to keep up the payments to the lender as well as monthly repayment to HEMAP.

    It is possible that there may be an additional cash contribution toward the mortgage delinquency when the HEMAP loan closes. Those who are eligible for a continuing mortgage assistance loan have the mortgage payments brought up to date and then subsequent payments to the lender are subsidized. Both types of loans are limited to a maximum of 24 months from the date of the mortgage delinquency or a maximum of $60,000,00 whichever comes first. The homeowners benefitting from the loan are required to pay up to 40 percent of their income toward their housing expenses. $25,00 being the minimum monthly payment allowed by law. Thus the mortgage is paid and the family do not lose their home.

    Pennsylvania HEMAP Program Help

    Are you facing foreclosure? Are housing and other living expenses mounting up and draining your tight budget? You are not alone. In Pennsylvania thousands of homeowners are also facing the possibility of losing their home to a foreclosure. Now is the time to take control of the situation and find ways to reduce your costs and apply for programs that will help you save your home.

    In our previous article we focused on how you can save money on your home’s energy expenses and carry out vital repairs with the help of Pennsylvania State programs. In this article we hone on one of the most successful mortgage aid programs in Pennsylvania and the United States. Although this program cannot help everyone at risk of foreclosure, thousands have saved their homes thanks to it.

    Pennsylvania Foreclosure Prevention Act and the Homeowner’s Emergency Mortgage Assistance Program.

    This Homeowner’s Emergency Mortgage Assistance Program (HEMAP) is unique. There are no other programs like it in the United States. This program, which has been running for over 28 years,  provides a loan to homeowners to rescue them from the imminent danger of losing their home to foreclosure. The HEMAP loan is secured on their property. There are two types of programs homeowners can apply for under HEMAP depending on their income and assets: continuing mortgage assistance and non-continuing mortgage assistance.

    Non-Continuous Mortgage Assistance.

    This program-type is for homeowners who according to HEMAP guidelines can afford to pay their mortgage. It is popular with homeowners who have suffered financial difficulties which caused them to fall behind in their mortgage payments but who can now afford the mortgage if only they were not behind in their payments. A non-continuous mortgage assistance program brings the delinquent loan up-to-date. The homeowner must then continue making payments to their lender and the HEMAP program until each loan is repaid.

    Continuous Mortgage Assistance

    This program is for homeowners who currently cannot afford their mortgages but who can reasonably be expected to afford them in the future. Under this program a HEMAP loan is used to pay for any arrears on the mortgage and HEMAP subsidizes the homeowner’s mortgage payments to the lender.

    Mortgage and Time Limits

    Both the non-continuous and continuous programs are available for a maximum of 24 months or $60,000, whatever happens first. Also, in both cases the homeowner must pay a minimum of 40 percent of his or her income towards housing costs. The minimum payment is $25. However, in the non-continuous format it is the homeowner who is responsible of paying for the mortgage, while in the continuous mortgage assistance HEMAP takes over this responsibility for the duration of the program and pays the lender with the homeowner’s funds and the HEMAP subsidizing contribution.

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