Your Options Are Limited

• In a standard mortgage refinance, you can work with any lender licensed to do business in your state. In a government-assisted refinance, you can only work with the lender you are currently sending your mortgage loan payments to. This does limit your choices; you can't shop around for a lower mortgage interest rate from competing lenders. Remember, though. Without the government's program, you might not be able to obtain a mortgage refinance at all.
  
  

The Requirements

• Before calling your mortgage lender, make sure that you meet the requirements of the Home Affordable Refinance Program. You have to be refinancing the home loan on a residence with just one to four living units. You need to be current on your mortgage loan payments -- you can't have been more than 30 days late on these payments in the last 12 months. And you must be refinancing a home loan owned or guaranteed by either Fannie Mae or Freddie Mac. You can search your loan to determine if it fits into this category by logging onto the refinance page of the federal government's Making Home Affordable website.
  
  

The Application Process

• Once you're convinced that you meet the program requirements, call your mortgage lender and ask for a refinance. Explain that you're underwater or have little equity. Ask your lender if he is participating in the government's refinance program. The good news is that most lenders across the country are. To start the process, your lender will send you a Uniform Residential Loan Application, also known as a Form 1003. You'll need to fill this out -- providing such basic information as your name, current address, current salary and employer -- and send it back to your lender to start the refinance process.
  
  

The Paperwork

• Your lender will require you to send in copies of the financial paperwork that proves that you can afford to repay your new mortgage loan. Expect to send your lender copies of your most recent federal income tax return, your last two paycheck stubs and bank savings and checking account statements. Some lenders will require that you also send in copies of your most recent credit card statements and any IRA or 401(k) statements that you might have. Your lender will study these to determine if you have enough money to make your payments.