How to Refinance a Mortgage to Stop Foreclosure in Maryland
Maryland property owners received more than 5,200 foreclosure filings in January 2010 alone, according to real estate information site RealtyTrac.com. If you are struggling to pay your monthly mortgage payment, there is a step you can take to avoid receiving your own foreclosure notice. You can apply to refinance your mortgage loan to take advantage of lower interest rates. This will leave you with a smaller mortgage loan payment. You'll need a solid credit score and enough equity in your home, though, to qualify for a refinance.
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Things You'll Need
- Copy of current mortgage loan statement
- Copy of most recent federal income tax return
- Copies of savings and checking account statements
- Copies of most recent credit card bills
- Copies of other--car, student or personal--loan statements
- Copies of last 2 paychecks
Instructions
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Find a nonprofit housing counselor near you. The Maryland Hope Initiative (See References) provides a list of approved nonprofit housing counselors. These counselors can work with you to help you organize your financial paperwork to prepare for a refinance. They may also be able to help you create a new budget so that you won't fall behind in any new mortgage payment that you might be able to secure.
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Call several mortgage lenders and banks, nationally and locally, and ask what origination fees they charge for a typical mortgage refinance. Ask, too, what interest rates they are giving to loans made to homeowners with solid credit. Once you find a lender or bank with which you are comfortable--you don't have to work with your current mortgage loan servicer--you can begin the refinance process.
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Check, too, with local housing assistance agencies that provide their own refinancing programs designed to help struggling homeowners lower their monthly payments. Maryland homeowners may qualify for the Homesaver or Lifeline refinancing programs from the Maryland Department of Housing and Community Development (See Resources) or the Bridge to Hope program from the Maryland Hope Initiative.
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Explain to your loan officer, whether you are working with a private lender or bank or with a housing assistance program in Maryland, that you are interested in refinancing your mortgage loan to one with smaller monthly payments. Tell your loan officer exactly how much money you still owe on your current mortgage loan. Also explain what kind of mortgage loan you currently have: 30-year fixed-rate, 15-year fixed-rate, adjustable-rate or any other variety.
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Make copies of the financial paperwork that your lender will use to prove that your gross monthly income is high enough and your monthly debt obligations low enough to support your new mortgage loan. These papers include your most recent federal income tax return, last two paychecks, bank savings and checking account statements, most recent credit card statements and other loan statements. Your lender will use these to make sure that your monthly debt obligations, including your estimated new mortgage payment, is less than 36 percent of your gross monthly income.
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Give your lender permission to run your credit. Most traditional lenders prefer to work with borrowers who have three-digit credit, or FICO, scores of 620 or higher. If your FICO score is 720 or higher, you'll qualify for the low interest rates that you need to end up with a lower monthly payment.
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Give your lender permission to send a real estate appraiser to your residence. This professional will determine your home's market value. This is an important figure. Traditional lenders usually require that you have at least 20 percent equity in your home for a refinance. If your home has dropped in value since you purchased it, you might not have enough equity.
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Send the copies your made in Step 3 to your lender or bank. If your lender approves your request for a refinance, set a closing date on which to sign the paperwork. You can usually do this online or by fax. You'll also have to pay any origination fees for the refinance. Make sure, though, that your new mortgage payment is low enough for you to afford. If it isn't, you still won't prevent a foreclosure.
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References
Resources
- Photo Credit house image by Earl Robbins from Fotolia.com
