President Obama announced a new plan this month to help homeowners cut their monthly mortgage costs by refinancing their FHA loans. The program, which goes into effect on June 11, could help 2 to 3 million homeowners – even those who are underwater on their mortgages.

To qualify, you must meet these requirements:

• You must have an FHA mortgage that was taken out before June 1, 2009. Mortgages backed by Freddie Mac, Fannie Mae, the Department of Veteran Affairs or private investors do not qualify.
• You must be current on your mortgage payments for the past 12 months. Any late payments prior to one year are OK, but your payments in the past 12 months must have been on time.
• Your refinance must lower your monthly principal, interest and mortgage-insurance payments and give you a net savings of at least 5%. If not, then you’re not eligible.

If you qualify for this program, you’ll receive some refinance perks to streamline the process and sweeten the deal:

• You won’t have to verify your income or employment status.
• Your credit reports or FICO scores won’t be reviewed.
• You won’t have to have a home appraisal done. The refinance is not based on your home’s current value. Your loan amount will be based on the previous appraised value of your home when you took out your current FHA loan.
• Your upfront insurance premium charges will be reduced from 1% of the loan amount to 0.01%. Plus your recurring annual insurance premium also will be lowered from 1.10% of the loan amount to 0.55%.

However, you’ll still need to pay closing costs on your refinance – either in cash or by having your lender include the costs in your loan at a slightly higher interest rate. This refinance program doesn’t allow you to add the closing costs to your loan balance.

To determine if you qualify for this refinance program and if it’s the best option for your situation, contact a trusted mortgage broker. We can help you figure out your potential savings and your suitability for the program.