Making Home Affordable program may help

NEW YORK --- The new federal program to let people refinance or modify their mortgages is expected to help millions of Americans lower monthly payments and avoid foreclosure. Here are answers about the Making Home Affordable program:

Q: How will my credit profile be affected?

A: Refinancing generally doesn't affect your score since it's simply a rewritten mortgage, according to Norm Magnuson of the Consumer Data Industry Association. This is especially true of refinancing under the federal program, because one of the terms of eligibility is that homeowners can't have missed a payment in the past year.

It's not yet clear what impact a federal loan modification -- an adjustment to terms of an existing mortgage -- will have on credit profiles, however, Mr. Magnuson said. Regulators haven't yet determined how the modifications will be reported, if at all.

If you're applying for a loan modification, it means you've already missed payments and hurt your credit profile. A loan modification should improve your credit profile in the long run since the idea is to get you on track for meeting payments. It might also free up money to pay off other debts.

Q: Is it possible my payments will be higher?

A: If you're still paying a low, introductory rate, it's possible. But the idea is to avoid the big interest rate spikes that come with adjustable-rate mortgages.

After applying for the Making Home Affordable program, your lender should give you a "good faith estimate" that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide refinancing isn't an improvement.

You can also check out the payment reduction estimator on the government's Web site at www.makinghomeaffordable.gov.

Q: Should I wait to see if mortgage interest rates come down before applying?

A: Rates are at historic lows. Last week, rates on 30-year mortgages inched up to 4.87 percent, but that's still close to the lowest level in decades. Waiting for the rate to go lower might backfire, said Ken Inadomi, the director of the New York Mortgage Coalition.

In case you do decide to wait: The Making Home Affordable program expires June 10, 2010.