|
FHA lenders may have a solution if you're behind on your mortgage payments that could prevent a home foreclosure. Over 50% of foreclosures could be avoided if borrowers contact their lenders to try to work something out before it becomes too late. Whether you choose to refinance your loan or do a loan modification depends on your circumstances and credit. With lenders tightening down their lending standards, refinancing your home needs good credit unless you qualify for FHASecure.
FHASecure, a program under the Economic Stimulus Act of 2008, specifically addresses foreclosure prevention and allows borrowers with high-risk subprime adjustable rate mortgages (ARMs) the opportunity to refinance to a fixed-rate mortgage loan. This program is only for those facing foreclosure. But, FHASecure expires on December 31, 2008. The HOPE for Homeowners Act, a Federal Housing Administration (FHA) program under the newly passed Housing and Economic Recovery Act of 2008 also addresses the foreclosure epidemic by allowing holders of subprime mortgages to refinance into fixed rate loans. But, if you refinance under the HOPE for Homeowners Act, you are required to share at least 50% of any equity you build in your home with the FHA should you decide to refinance again later or sell your house. Contact our lending partners, FHA Mortgage Refinance Loans to speak with a loan officer directly.
Should I Refinance or Do a Loan Modification?
If you don't qualify for refinancing or are not interested in sharing your home equity with the FHA, you may want to consider a loan modification. The U.S. Department of Housing and Urban Development (HUD) defines a loan modification as a permanent change in one or more of the terms of a mortgagor's loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford. This typically involves folding your past-due mortgage payments and associated fees and interest into the balance of the loan and re-amortizing the new balance.
Sometimes, you can get a temporary forbearance, which allows you a break from making mortgage payments for an agreed-upon period of time, which gives you a chance to get on your feet financially. In short, your mortgage loan terms are modified, and you are given a fresh start in managing your payments. A loan modification also brings your account current immediately. It has no negative impact on your credit other than any you may already have had before doing the loan modification.
Typically, loan modification happens in the later stages after 60 or 90 day late payments. And, a lot of people say that loan modification is a good last ditch option prior to foreclosure. But, you don't necessarily have to be late on your mortgage to do a loan modification. You could save yourself a lot of money by simply doing a loan modification on your existing mortgage loan. Refinancing costs money because it requires an appraisal of your home, and there are closing costs involved. However, loan modification doesn't have closing costs and generally doesn't require an appraisal, although the lender does have the option of having your home inspected to make sure that you haven't done anything to your home that could affect its value. Fees for loan modification are also generally lower than for refinancing, as well.
|
