How to Refinance Under the New Mortgage Law
A new mortgage law, Hope for Homeowners, took effect Oct. 1, 2008, affording at-risk borrowers a chance to refinance under more affordable terms. It helps borrowers currently facing or under foreclosure to obtain a fixed-rate, 30-year mortgage.
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Things You'll Need
- Loan agreement
- Mortgage loan statement
- Documentation supporting assets
- Credit card, car loan and other loan statements
- W2 and paystub
Instructions
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How to Refinance Under the New Mortgage Law
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Log on to the website listed in the resources bar below. It was posted by the US Department of Housing and Urban Development. Review the procedure. Pay special attention to the restrictions as you do not want to start a refinance only to find out you are not qualified. For example, you would not be eligible if your home is in late-stage foreclosure and your income is insufficient to support even a lower-cost mortgage.
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If you do qualify, click on the link that takes you to a list of approved lenders. Consult with a financial adviser about your current loan and about which lenders have a strong track record of helping homeowners avoid foreclosure. If you don't have a financial adviser, ask family, friends, and work colleagues for recommendations.
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Collect all of your personal paperwork, such as the mortgage documents for your current loan; copies of credit reports; W2s and recent pay stubs; deed of trust for your home; and other loan statements (car loans, personal loans and credit cards). Schedule a meeting with your loan representative. At the meeting, be sure to review the qualifications for the Hope for Homeowners law before opening your application for a new loan.
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Notify your current mortgage holder of your participation in the program and request a payoff figure for your mortgage, including any delinquent balances. Provide your government-sponsored lender with all income verification and ownership documents.
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Keep in mind your long-term financial goals before agreeing to a loan, and make sure it actually does alleviate the pressure of your current mortgage. Before closing, schedule a meeting with your lender, yourself and your spouse (if applicable) as well as any other parties on the deed of the home. Review all paperwork and ask for copies of all final loan terms. Ask questions if any new information has surfaced.
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Tips & Warnings
Be wary of new offers from your current mortgage company. Remember, you are attempting to leave a mortgage that you can no longer afford. Examples of risky mortgage provisions are adjustable or variable rates, reverse amortization (in which a principal balance increases), prepayment penalties and balloon payments (in which smaller payments over a period of time result in a substantial lump sum payment coming due later in the loan).
At closing, make sure the terms to which you initially agreed at your first meeting match those on the closing documents. The last thing you want to do is to take out a new loan that also puts you into financial straits.
