-
Step 1
Apply for a 3-month trial loan modification under Obama's new "Making Home Affordable," which will reduce your mortgage interest rate. Under this plan you can lock in your lower payment for 5 years if you make on-time payments for 90 days. The plan also includes a $1,000 bonus to be paid into your mortgage every year for the next 5 years if you make your payments on time.
-
Step 2
Learn the criteria that you must meet in order to qualify for modification to your loan under the "Making Home Affordable" program. You must have taken out your mortgage before Jan. 1, 2009, and your mortgage cannot exceed $729,000 in value. Jumbo mortgage loans are ineligible. You also must be the primary occupant of your home - rental and investment properties do not qualify. And, of course, you must either be defaulting or on the verge of defaulting on your loan.
-
Step 3
Assess your debt level. If your total debt exceeds 55 percent of your income you still can refinance under the program, but you also should seek a debt counselor. You also will need to prove that you have the income necessary to make your mortgage payments. If you qualify your loan rate could drop to as low as 2 percent and your monthly payment will not exceed 31 percent of your gross income.
-
Step 4
Pay more than your minimum payment each month if possible. Even $50 more than the minimum per month can make your principal shrink noticably over 5 years. Take a second job if necessary, but do whatever you have to to make those payments on time and whittle down your principal. If you can manage this, your payment will significantly lower when the lower 5-year interest rate term expires.
