The Presidential Plan

With interest rates lower than they've been in years, there's never been a better opportunity for a homeowner to dramatically change his or her financial future by obtaining a home loan refinance. However, even the lowest rate in history wouldn't be able to help someone who can't qualify for a loan. Unfortunately, as evidenced by the surge in foreclosures, a lot of people fall into that category.

The Tide Has Turned

President Obama's Making Home Affordable plan hopes to change that. By restructuring the guidelines of traditional loans, the initiative has opened the door for an estimated nine million homeowners who previously didn't stand a chance of qualifying for a home loan refinance deal. The idea is by allowing these people to also take advantage of the low rates, there will be fewer foreclosures, more prosperity and, eventually, a better economy.

Prior to the passage of the plan, homeowners were restricted to borrowing up to 80 percent of a house's value through a home loan refinance. That shut out everyone who didn't have at least 20 percent equity in their homes, leaving them hopelessly locked into the higher rate--and higher monthly payments--they originally signed on for. Since a higher rate means more time before equity is built, for many homeowners the situation seemed hopeless.

Hope for Homeowners

The Making Home Affordable plan aims to restore hope by offering home loan refinances that exceed the 80 percent threshold ... all the way up to 105 percent. That means a family who owes more than their home is actually worth could qualify and, with a lower interest rate, upright their upside-down situation. The new qualification standard gives people who feel they're in hopeless situations a fighting chance.

That's not to say one has to be teetering on the edge of financial ruin to take advantage of the plan. Making Home Affordable is also intended to assist homeowners who got themselves locked into loans that might not be in their best interest. For example, a borrower may have been attracted to an interest-only loan because of its initial low monthly payments ... and have since realized they've shelled out a lot of money but made no progress in building equity in the house. People in situations like this might not see a big reduction on their monthly payments, but they will see their equity increase and they'll end up saving a lot of money over the life of the loan.

An Easy In

To qualify for a home loan refinance under the Making Home Affordable plan, the original loan has to be conforming, which means it's controlled by Fannie Mae or Freddie Mac, and payments on it have to be current. Plus, the house has to be occupied by the owner, whose income needs to be enough to cover monthly payments.