How to Refinance a Home in Foreclosure
Refinancing a home in foreclosure is difficult, but not as challenging as is commonly believed. The Federal Housing Administration (FHA) also subsidizes refinancing loans to homeowners in foreclosure. In many cases, refinancing a home in foreclosure will be preferable to losing the house. Conventional lenders also provide refinancing loans to individuals in foreclosure, although they will likely have higher fees and interest rates than are typical for borrowers with good credit.
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Instructions
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Start looking for refinancing loans as early as possible in the foreclosure process. It can take six months or longer once the foreclosure process begins for you to actually be evicted from your home. The sooner that you take action, the better your chances will be of securing a loan and remaining in your home.
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Inform the lien holder of your intent to refinance. Ask the lender if it's willing to assist you in your efforts to hold onto your home. Find out if the bank will waive the additional legal fees attached to your mortgage balance if you are able to get a refinancing deal. It's in the bank's best interest to avoid completing the foreclosure process.
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Consider contracting with a foreclosure lawyer. A foreclosure lawyer will be able to assist you in dealing with the lender and remaining in your home as long as possible. They will have expertise in what sort of language to use in writing letters to your lender requesting additional time and better terms when you are trying to determine how to pay off your existing mortgage.
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Apply for a foreclosure refinancing loan subsidized by the FHA. These loans have a lower credit score requirement than most home loans, as the FHA insures the entire amount of the mortgage. Down payments are capped at 3 percent.
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Apply for regular refinancing loans. Expect lenders to require more documentation of your income than ordinary because you have a home in foreclosure. If your mortgage is your only delinquent account, your credit rating may still be sufficiently strong enough to get a refinancing loan at a reasonable rate.
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Sign a refinancing agreement. The new refinancing loan may not pay off the entire balance of your original mortgage due to the additional late payment, legal fee and foreclosure fees tacked onto it. You may need to pay those charges yourself before your refinancing agreement can be finalized.
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