The Missouri Housing Development Commission, MHDC, has rolled out the “Refinance Program” to help home owners who are underwater on their mortgage, or owe more than what their house is worth, refinance their mortgages and MHDC will pretty much fund your closing costs for free with certain conditions that have to be met, making the refinance a no closing cost mortgages. They also have another option which will in effect allow your to lower how much you owe on your house so that can refinance.
The way the first program works is that MHDC will give you up to 3% of your primary mortgage to use to refinance your house. That 3% can be used to cover the closing costs of your mortgage therefore making it a no closing cost mortgage. The stipulation is you have to live in the house for five years. As the five year clock ticks away, that 3% will slowly be forgiven until you owe nothing and the MHDC mortgage is closed out at the end of that five years.
You can only take advantage of the program if your payments will drop at least $100 a month or the interest rate will go down at least 1%. If you have a 7% mortgage, you have to refinance into a at least a 6% mortgage or less which in this environment is VERY doable. If you have a 6% mortgage, you’ll have to get the interest rate down to at least % which is very doable, or your payments will have to drop at least $100 a month. This may be difficult for many people although it will probably work for those who have significantly paid down their mortgage from the time they first took out the mortgage and are now close to 100% loan to value.
You cannot take out a cash-out refinance mortgage and you must receive a face-to-face counseling from a HUD approved counseling agency.
The same conditions apply above for the grant program, which is where MHDC will in effect give you money to pay down your mortgage to an amount in which lenders will loan you money. If you owe more on your house than it is worth, MHDC will give you a grant of up to 10% up to $10,000 to lower the mortgage on your house so that you can get within the guidelines to refinance your house. Let’s say that your house is worth $100,000, but you owe $107,500 on your house, they will give you $10,000 so that your loan to value will drop to $97,500 which would then put you into the FHA 97.5% refinance guidelines. Now granted, you will probably have to pay the closing costs on that kind of refinance.
You can also take advantage of these refinancing programs if your current mortgage is an ARM or Balloon without the 1% or $100 requirements. That’s great because it allows you to get out of an uncertain mortgage and into a fixed rate mortgage that you can plan your budget around.
The funding for this program is limited and it is usually on a first come, first served process. MHDC doesn’t say how much they’ve allocated to this program so I am unable to tell how many mortgages it may help out, but get there quickly to take advantage of the program. Also, you have to go through a certified lender and it appears that you may be able to take advantage of both programs at once if you need the assistance. I can’t answer for certain that question, but you should ask them.
The MHDC’s phone number is 800-246-7973.
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