In March, President Obama and his administration announced the Making Home Affordable Plan.  The plan is designed to help slow down foreclosures and give common Americans the chance to have access to lower mortgage rates.  The original plan was not to keep mortgage rates under 5% but other aspects of government interaction are causing this to happen.  Overall, home loan modification programs set up by the Federal Government will help you save money.

Prior to the home loan modification program Making Home Affordable, individuals who did not have at least 90% loan-to-value in their home found it extremely hard to refinance.  That is no longer the case.  The government is giving incentives to mortgage lenders to offer low refinance rates to individuals even if their loan-to-value ratio is above 100%.  The highest ratio that most lenders are willing to tolerate during the refinance process is 105%.

With a great number of homes being underwater throughout America, this is something that could greatly assist those who want to refinance.  Most homes that are underwater have lost value because their has been a foreclosure or short sale in the area nearby.  It is also the fact that there is no longer a heavy demand for new homes.  Unfortunately, home builders went above and beyond during the housing bubble and built way too many new homes.  We have to find a way to get those homes off the market.

Now that Americans have a much better chance of getting a low refinance rate it should help in stimulating the economy.  No one really knows what it will do to the housing market, but if Americans have more money in their pockets that is always a good thing.  I think most Americans learned that spending all their money on everything and anything they wanted is no longer a smart decision.  In the 1990s and early 2000s if you wanted something you just bought it on credit and worried about the bill later.

Well, that was fine when the unemployment rate was well below 5%.  Now that the national unemployment rate is making its way to 10% spending habits must change and they have.  Only the essentials are being bought at retailers.  Families are no longer buying superfluous items just to decorate or feel good about themselves.  The one good thing that this economy has done is that it has taught people that saving money is a very important part of life.

If you can refinance a full percentage point below your current mortgage, you are definitely going to save quite a bit of money.  Now that the government has gotten involved it is time to actually seek out the refinance you have been thinking about.  Getting a home loan modification is no longer the struggle it used to.  There are several websites available and Making Home Affordable will tell you everything you need to know about getting a new rate on your current mortgage.

Do not be fooled into believing that just because the government is involved that you will get a rate under 4.75%.  The low rates that are being advertisted all over tv and the internet are for those who have been extremely smart with their financial decisions.  If you have a credit score under 740 or have any long term debt that might hinder your ability to make your mortgage payments, it is unlikely that you will get an extremely low rate.

This does not mean that you should not try to get a lower rate.  You never know what the mortgage lender may think until you actually put in the application and see what happens.  You might get lucky and find out that the lender has been strongly urged by the government to complete 1000 applications by the end of the week.  There are many extenuating circumstances that are coming up because President Obama is taking action and changing the way mortgage lending is conducted.

The other important aspect about the home loan modification program Making Home Affordable is that home owners are only going to have to pay 31% of their monthly salary in a mortgage payment.  If your mortgage is backed by Fannie Mae or Freddie Mac, which almost 70% of mortgages are, then your mortgage payment should adjust based on your monthly income.  If over 50% of your monthly income is going towards your mortgage payment you are prime candidate for Making Home Affordable.

The idea behind this is that if Americans are using such a large portion of their paycheck to pay for a mortgage they have very little money to spend anywhere else and stimulate the economy.  Also, if your mortgage payment is over 31% of your monthly income, the odds of defaulting increase greatly.  A high mortgage payment can take a large toll on any financial situation and President Obama does not want that to be the case in this economy.

If your mortgage amount does decrease, it will not stay that way for the remainder of the loan.  Over the next few years, you will see it gradually work its way back to the original monthly mortgage amount.  Hopefully by this point Americans will have saved some money and be on their feet better financially.  If that is not the case then maybe they should just not own a home outright.

There is very little doubt that President Obama is doing everything in his power to give Americans a better life.  Signing into law Making Home Affordable was one of the first steps to making this happen.  I would encourage anyone seeking a home loan modification to do extensive research at MakingHomeAffordable.com.  There is a great deal of information on the site and it will take many days to get through it all.  Educating yourself and figuring out what the government can do to help you may save you hundreds of dollars a month so take the time and do it!

The most important thing about Making Home Affordable is that it is an attempt to help Americans change.  We have lived well above our means and made very bad financial decisions in the recent past.  This needs to change and the current recession is helping us figure that out.  President Obama is also helping us by taking every step to stimulate this economy and help continue to make America the best country in the world.