How to Refinance a Mortgage in Foreclosure
During a recession where there is a slump in the property market, homeowners sometimes find it difficult to make their mortgage payments. However, at the same time, they can't just hand over their homes, either. When someone is facing a situation involving foreclosure on their home, it is best to do everything possible to prevent the loss of their home. Refinancing is an option that will aid in avoiding a foreclosure as well as providing a way to save your credit. Refinancing also lowers your mortgage payments and eases the terms, to make things more manageable.
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Things You'll Need
- Proof of income
- Mortgage loan statement
- Federal income tax return
- Bank checking account statements
- Savings account statements
- Credit card bills
- Loan statements if applicable
- Last two paychecks
Instructions
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Talk to loan officer who handles matters relating to home loans at your bank. Do this early on, before you begin missing payments. Contact your bank as soon as you realize you won't be able to make timely future payments. A timely and professional communication with the banker gives you a good chance in the refinancing process. Maintaining a good relationship with the bank before the foreclosure will help protect your credit rating and give you a better chance of refinancing your mortgage.
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Make your credit report look clean. If you have any issues with your credit report, make sure you resolve them before you go to discuss the refinancing of your mortgage. A clean credit report gives you a better chance of success in the refinancing process.
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Talk to the loan officer in detail about your specific situation. Banks are different from real estate companies. Banks don't like to see foreclosed houses. They would rather refinance your mortgage and make the payment terms easier for you. So tell them all the details. Have confidence they will help you.
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Ask for a mortgage that is longer in term, at a fixed-rate and low-interest to stall the foreclosure. Extending the length of your mortgage will take longer for the loan to be repaid but will make your monthly payment attainable.
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Explain to the loan officer that the refinancing charges and closing costs for the new loan should be figured into the mortgage. The outcome will be a longer time to pay what you owe, with a larger amount paid in the long run, but the payments will be lowered to a more affordable amount.
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Tips & Warnings
Check for interest rates in the business section of your local newspaper that lists standard mortgage rates in your area. Then contact the bank advertising that rate and ask to refinance.
Talk to your lender (bank) for refinancing before searching for any other company. Most banks help homeowners to refinance their mortgage and to avoid foreclosures.
Ask your bank for a rate reduction. If your bad credit limits your prospects for refinancing, the bank might work with you to lower your payments. They would want to avoid a foreclosure as it would mean a loss of money to the bank as well.
Hope for Homeowners' is a U.S. government plan for helping the homeowners in refinancing of mortgages in case they are facing difficulties with making the mortgage payments. This 30-year program provides a fixed rate mortgage and is insured by the Federal Housing Administration (FHA). You can call them at 800-225-5342 or visit the website hud.gov/hopeforhomeowners.
The Obama Administration's Making Home Affordable Program provides homeowners in danger of foreclosure opportunities to refinance or modify their mortgage in order to make monthly house payments more affordable.
Don't go for adjustable rate mortgages. This makes the initial payment lower, but when interest rates rise, your payment will rise with it automatically. Ask for a fixed rate mortgage.
Beware of the scam lenders who target home owners struggling with foreclosure. These scammers will falsely guarantee to help you in lowering your mortgage payments.
Help regarding foreclosure is available for a very small fee or sometimes absolutely free. If someone asks for a large sum as a fee, beware.
Do not sign any document without reading and understanding it.
References
Resources
- Photo Credit $100 house image by Paul Heasman from Fotolia.com
