The FHA Short Refinance program is designed to help homeowners who are current on their mortgage payments but cannot qualify for a mortgage refinance because their home is underwater or worth less than its mortgage balance.

FHA Commissioner described the Short Refinance Program as a life line the FHA was throwing to help households suffering financial hardships because of the decline in property values. The program has two main goals: to reduce monthly mortgage payments and to provide a safer and more secure mortgage.

For instance, households who are locked in a variable interest mortgage and are already struggling to make ends meet could face foreclosure if the interest rate of their mortgage rises. If they can refinance to a fixed-rate mortgage with a low interest rate, they can protect their mortgage from future hiccups in the economy and guarantee themselves a mortgage they can afford. A fixed-rate mortgage also allows you to budget better because you know how much you need to pay for your mortgage every month.

WHO TO CONTACT ABOUT THE SHORT REFINANCE PROGRAM

If you think you qualify for the government’s short refinance program, you should contact your lender. The program is voluntary and your lender has the last word when accepting or denying your short refinance application.

To qualify for a short refinance program you must have a loan insured by the FHA, have a credit score of 500 or higher, live in the property as your main residence, have an underwater mortgage and be current on your mortgage payments.

The Treasury Department gives lenders incentives for approving short refinance mortgages. However, to receive such incentives the lender must agree to reduce the mortgage balance by at least 10 percent. The refinance mortgage must have a loan-to-value ratio of no more than 115 percent. This means that the mortgage balance of a short refinance cannot be more than 15 percent over the appraised value of the property.

The Short Refinance Option will be open for homeowners until 2012 and could help up to 4 million homeowners improve their financial security and reduce their mortgage payments. Refinancing your mortgage for a lower interest rate can save you thousands of dollars and help you pay off your mortgage early.

However, what if you are a senior resident. Does refinancing make sense for seniors? Our next article will study the refinance programs available to senior residents and analyze which options are more advantageous.

Millions of homeowners in the United States are stuck with a mortgage they can barely afford and that is worth more than the property. Worse still, many of these mortgages are based on a variable interest-rate and could increase at any moment and force their owners into foreclosure. To help these cases the government has set the Short Refinance Program. It is designed for homeowners who can afford their current mortgage payments but do not qualify for a mortgage refinance because their home is underwater.

Does a Refinance Make Sense For Senior Homeowners?

This is a good question for all homeowners, not just seniors. However, seniors are in a specially vulnerable position because their income may be reduced if they retire. Seniors who are already retired, often have a fixed income and their capacity to adapt to an increase in mortgage payments is small. For these reasons, a mortgage refinance may be especially advantageous for seniors.

To illustrate, if you refinance your current $150,000 mortgage with a 5.5 percent interest rate for a fixed-interest rate of 4.25 percent, you will achieve two things. First, you will reduce your yearly mortgage payments by $1,800 and, second, you will guarantee your mortgage payments don’t change in the future when your pension or retirement savings are the only income you have.

However, this does not mean a refinance always makes sense. There are two main issues you should look at carefully. One, what is the cost of refinancing and how long it will take to recoup the costs. Two, how much do you have left on your mortgage.

COST OF REFINANCING

Refinancing can save you thousands of dollars but, as is often the case, it takes money to make (or save) money. The cost of refinancing a mortgage ranges from 3 to 6 percent. On a $200,000 mortgage that represents anything from $6,000 to $12,000. Before even considering a mortgage refinance you must look carefully at the savings you make. If it is going to take five years to recoup your refinance costs and you are planning to sell the house in five or less years, refinance may not be a good idea.

TIME AND INTEREST

The second issue to consider is how long you have left on your mortgage. When you start paying a mortgage most of your payments go to paying the mortgage’s interest. The longer you have been paying a mortgage the higher the percentage of your payments that goes towards reducing your mortgage balance. If you restart your mortgage with a 30-year loan and you only had 15 years left, it is unlikely the savings from your refinance will cover the cost of paying interest for 15 years more. Another option is to refinance your mortgage for a shorter refinance to offset the cost of restarting the clock on your mortgage.

The state of New Jersey has a system of loans created to help senior citizens access the equity in their home. In this way they improve their standard of living supplementing their pension while they have the health and strength to enjoy it. They are allowed to receive a loan without weekly or monthly repayments for as long as they live in the home, by using the property
as collateral. The property must be the owners´ principle residence for the life of the loan.
In this way they are able to benefit now from all the hard work they did while paying up the mortgage on their present home for many years. The amount loaned depends on the value of the property and the age of the borrower (from 62 years and over). Some worry that they will have nothing left to leave as an inheritance, however there is no obligation to borrow the full value of the home and any funds remaining after the loan is repaid will be returned to
the borrower or passed on to the heirs.
The borrower will receive equal monthly payments as long as the borrower occupies the home as a principal residence, for a fixed period of time agreed upon by the borrower until the line of credit is exhausted. For the borrowers´
information a meeting will be arranged as required by the U.S. Department of housing and Urban development before the loan is taken for the Home equity conversion mortgage program, detailing the different kinds of home equity conversion mortgages available, the appropriateness of a home conversion mortgage and the alternatives.
For details of the maximum loans according to property value and other conditions see HMFA approved lender list.

The state of New Jersey housing research center for senior citizens has been set up to make it so much easier to find or buy affordable or special needs housing . It’s kept up to date because when units are occupied they are removed from the list. All you have to do is describe what type of housing you need and the computer will inform you of all the units that meet your requirements in the state of New Jersey.
You could mention : How much you are able to pay or if you need handicap accessibility or not, In what area you would like to live, The number of beds or bathrooms or if you would like to live
near to public transport. It may be that you need services for people with special needs. When you enter this information into the system you will be informed of the housing that best fits your personal situation.
This service is completely free and has been available since 2005.

Seniors can use a HECM to finance the purchase of their new home.

HECM for Purchase is a subprogram of the FHA’s Home Equity Conversion Mortgage Program. It helps senior citizens (of 62 or older) to buy a new main home using the money from a reverse mortgage. The idea behind this program is to allow older homeowners to have the funds to buy a new home and get a reverse mortgage in one transaction. This helps to reduce the total cost (already high for a reverse mortgage) and accelerate the processing time. It also helps senior citizens to relocate to another area closer to their family or friends, or allows them to downsize their home to a more manageable size that fits their needs. Some homeowners will also use HECMs to finance the installing of ramps, handrails, walk-in baths and other support systems in a new home.

One of the attractions of a HECM for purchase loan is customers can opt for a fixed rate loan. This helps borrowers budget more carefully the cost of a reverse mortgage and predict the buying-out cost if they decide to sell their home.

If you are interested in buying a HECM for Purchase reverse mortgage you will need to compile a list of documents and forms, some of which are not required for other types of mortgages.

Credit Reports

As with all mortgages you will need to authorize a credit report so the FHA and your lender can assess your reliability as a borrower. However, you will also need to authorize a credit report for your spouse even if he or she is not signing the HECM reverse mortgage. This is done to check the financial obligations and other mortgages a spouse may have that could affect the lien status of a HECM.

60-day Physical Requirement

HECM for Purchase borrowers must start living in the new home as their principal residence within 60 days of buying the reverse mortgage. Although it is the job of the lender to document and prove to the FHA borrowers are living in the home, it is worth understanding this requirements because your lender might require proof of residence from you.

Eligible Properties

Seniors can use a HECM for Purchase reverse mortgage to buy one-to-four unit properties which have been totally completed and are habitable according to local laws. For instance, a newly constructed house without a Certificate of Occupancy or its local equivalent would not be eligible for a HECM for Purchase reverse mortgage.

Government Mortgage Help for Retirees

Do you wonder what kind of government mortgage help there is for you, as a retiree? Some information to help the elderly stay in their homes can be found at the Department of Housing and Urban Development (HUD) official website, under the category, Information for Senior Citizens. There is information on reverse mortgages for senior citizens.

If you a retiree and are having a difficult time financially, either because of your mortgage, or for some other reason, a reverse mortgage might help you. Those 62 and older can receive a cash payment for the equity they have in their homes.

Maybe you are having other bills, such as medical bills, long-term care insurance, or some other major expense, that is making it hard for you to make the mortgage payment, the cash from a reverse mortgage could help you pay off those debts. It might then be easier to make your mortgage payments, or repay your reverse mortgage loan. Because you don’t have to repay the loan as long as you live in the house, a reverse mortgage could help you avoid foreclosure.
You can receive the money as a lump sum payment, monthly payments, or a combination of both. There are some reverse mortgages, such as HUD’s Home Equity Conversion Mortgage that will provide a line of credit you can you use whenever you need cash.
The advantage of a reverse mortgage is you would not have to repay the loan as long as you live in the house as your principal residence. If you have not paid it back when you die, however, your heirs, if any, will have to pay back the loan out of their inheritance, or their own pockets.

You can qualify for a reverse mortgage without a credit check. There are no income requirements. Although the program is often used for other purposes, such as making home improvements, buying cars, or vacations, it can provide mortgage help for those who need it.
HUD has a list of approved reverse mortgage counselors. You can search by state.

Another program that can provide mortgage help for retirees is not specifically for the elderly or retirees, but many such people can qualify for the program. President Obama’s mortgage program can help those who cannot make their monthly loan payments to receive a loan modification.

Your monthly payments might be reduced if your interest rate has increased, or you are receiving less money. You might qualify if your home is your primary residence, your mortgage is equal to or less than $729,750, you are having trouble paying your mortgage, and you received your mortgage before January 1, 2009.

Your payments would be reduced by reducing your interest rate to 2%, extending the loan term up to 40 years, and if you would defer a portion of the principal until the loan is paid, and waive interest on the deferred amount.

One other program, not specifically for retirees, but which could provide help for those facing foreclosure, including the elderly, is Fannie Mae’s Deed for Lease program. Those who face foreclosure may be able to stay in their homes by temporarily signing their lease back to the lender and renting the home at fair market value. More information can be found on the official Fannie Mae website.