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I tried to refinance a mortgage with bad credit in order to avoid or stop house foreclosure, only to be denied? This is a common complaint. Mortgage lenders have tightened their lending standards to the point where it is nearly impossible to refinance a home these days, so many borrowers are stopping a foreclosure with a loan modification. This is as a result of the credit crunch and declining home values. You may not have enough equity to refinance. Most lenders expect 80% loan to value (LTV) or less. 75% is preferable. And, your credit has to be excellent.
However, you do have foreclosure prevention options. If your credit was good before you got to where you could no longer afford your mortgage, you could possibly refinance with FHASecure. FHASecure allows you to refinance up to 95% LTV. But, your credit has to be in pretty good shape to qualify, and this program is ending on December 31, 2008. So, if you want to refinance with FHASecure, contact us now.
If your credit is less than stellar, you may be able to still get bad credit mortgage refinancing through FHA. Another program was signed into law as part of the Housing and Economic Recovery Act of 2008, which was passed in July. This program allows people with less than perfect credit and a mortgage they cannot afford to refinance into low, fixed rate loans. And, you can finance up to 95% LTV with this program.
What if you're upside down on your loan?
In this case, it may be time to work with a loan modification lawyer who specializes in helping borrowers with less than perfect credit. Loan modification has no credit score requirements because it's not a refinance, but rather a renegotiation of your existing mortgage loan terms. A loan modification lawyer could help you negotiate a:
Special Forbearance - a written repayment agreement between a lender and mortgagor, which contains a plan to reinstate a loan that has been delinquent for at least 90 days.
Loan Modification - a renegotiation of mortgage loan terms that could include refinancing the debt and/or restructuring the mortgage terms. This could help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem but your net income is less than it was before the default (failure to pay) occurred.
Partial Claim - an interest-free loan from HUD to bring your mortgage current. You may qualify if:
- Your loan is at least 4 months delinquent but no more than 12 months delinquent.
- Your mortgage is not in foreclosure.
- You are able to begin making full mortgage payments.
When your lender files a Partial Claim, the U.S. Department of Housing and Urban Development (HUD) will pay the amount necessary to bring your mortgage current. A Promissory Note is executed, and a Lien is placed on your property until the Promissory Note is paid in full. The Promissory Note is an interest-free loan and will be due if you sell or leave your property, or when your mortgage matures.
The above-listed options won't damage your credit any more than it already is due to your mortgage payment being so far in arrears. The only other option to preventing foreclosure is a short sale--where you get the lender to agree to sell your property and accept less than what you owe as full payment for the mortgage. This will do further damage to your credit and should be used as an absolute last resort to prevent foreclosure, which is worse for your credit.
If you're facing foreclosure and want to know what your options are, contact us today. We'd love to help you get back on your feet and on the road to financial recovery.
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