Real Estate Guide 2009
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Bailout help for struggling homeowners

Besides helping would-be homeowners, the government has announced several plans designed to provide relief for people who already own homes but are struggling to keep up with their payment. Here are three ways homeowners can get assistance:

• Payment reduction and refinancing.
• Expansion of the home-improvement tax credit.
• Higher FHA reverse-mortgage loan limits.

Payment reduction and refinancing

The federal government's Making Home Affordable program is intended to help current homeowners remain in their homes even if they are struggling to make their mortgage payment.

This initiative targets at-risk homeowners, including those who owe more on their homes than the home is worth, a common position known as being "underwater" or "upside-down." It aims to help homeowners reduce monthly payments to more manageable levels.

The program has two aspects -- a loan refinance program and a loan modification program.

The refinance program -- known as Home Affordable Refinance -- offers borrowers who haven't missed a payment but are at risk of default with a chance to refinance at rates as low as 2 percent. 

"The real benefit is for people who were underwater who couldn't get a regular refinance," says Joe Gross, president of Teaneck, N.J.-based Qualified Mortgage Inc. and author of "How the Greed of Wall Street and Your Mortgage Lender Are Destroying America's Credit."

"It lets them do a noncash-out refinance even if they don't have any equity in the house," says Gross.

The loan modification program -- known as Home Affordable Modification -- modifies loans so a borrower's housing payments are no more than 31 percent of monthly gross income.

"If this helps keep 4 (million) to 5 million people in their homes as intended, it will help us dig out of this recession," says Gross.

Bankrate offers two quizzes that can help you determine if you qualify for either a refinance or a loan modification.

Expansion of the home-improvement tax credit

The tax credit for making energy-efficient home improvements has been raised to 30 percent of the cost of the improvements, up to a maximum of $1,500.

Eligible improvements -- which must meet the standards established by the federal government -- include replacing doors and windows; adding insulation; and installing new heating, air conditioning systems and water heaters.

"The tax credit on home improvements works as a great incentive for homeowners who need to make energy-efficient improvements to their homes," says Greg Smith, a Certified Financial Planner with The Wise Investor Group in Reston, Va.

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