A short sale, deed in lieu and foreclosure are last resorts. While it might be frustrating to pay for a home that is worth less than you owe on it, if you can still make the payments, do so. While you want to address the mortgage imbalance, don't let your credit be ruined because of it.
Ideally, the housing market will appreciate, and you will be back in the black with equity in the home soon. If you are experiencing financial hardship, explore some of the unemployment assistance programs offered through the Federal Housing Administration and Keep Your Home California. This is important not just to keep your home but also to remain current on mortgage payments. Being current is an eligibility requirement for some loan modification programs. Although it is a government program, HARP is actually offered through private mortgage lenders.
To qualify for a refinance through this program, you must work with the company that is already servicing your mortgage loan -- the company to which you send your mortgage payments each month. As with the previous version of HARP, your lender is under no obligation to refinance your underwater home loan.
The government does provide financial incentives to lenders that complete HARP refinances, but it does not force lenders to originate refinances. Not all lenders participate in the program. Call your lender to determine if it offers HARP refinances. Ideally, a homeowner can refinance their loan through a local bank or mortgage company, but there are special conditions required to qualify for an upside-down mortgage refinance.
For instance, a borrower will need to have a good credit rating, a regular and reliable income — such as a salary — and a certain amount in cash, usually about 15 to 20 percent of the current value of the home.
While it is possible, the process of refinancing an upside-down mortgage loan is usually a long and tedious one. It is also common that these loans require more documentation to verify things like income, employment, etc.
It is important, therefore, that an applicant and loan officer remain patient and diligent. The PRA's goal is to work with lenders to reduce the principal balance of the loan.
The FHA2LP works to reduce or eliminate a second mortgage so that your combined loan value doesn't exceed percent of your home's value. Speak with a HUD counselor to determine current programs and your eligibility. Keep Your Home California has a unique program for seniors to help pay for any back taxes, insurance or association dues on the home.
If you are unable to modify, the FHA has a program to help prevent foreclosure but get you out of the house. This "managed exit" program, called Home Affordable Foreclosure Alternatives, is a last option for those at risk of foreclosure.
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