In today's economy many people with a home loan need to refinance their mortgage. If you are feeling crushed by your monthly mortgage payment it may be time to consider a mortgage loan modification. Have you lost your job or taken a large pay cut? Has a serious illness or other type of hardship affecting your family? If any of these questions apply to you, keep in mind you do have options.
As the United States recovers from the largest housing bust since the Great Depression many people are left trying to decide what to do with their home loan. There are several government programs being promoted during this housing recession. The newest program being offered by the government is the FHA Short Refinance. The qualification requirements and exclusions, like many other government programs will probably keep most people from qualifying for this. Here are just some of the qualifications:
- You cannot be behind in your mortgage. The FHA Short Refinance program is only for those that are current on their existing mortgage.
- The mortgage must be on your primary residence.
- Your loan cannot be held by Fannie Mae or Freddie Mac.
- You have to meet current FHA financial guideline.
Even though the exclusions and qualifications of the FHA Short Refinance are very restrictive, it may be worth checking into.
There are other alternatives to keep in mind regarding your existing home loan. A refinance mortgage may ease the monthly payment burden if your circumstances have not changed greatly since you contracted the loan. However if your income situation has changed significantly, having your current mortgage modified may be a substantially better alternative.
What is Home Loan Modification?
The modification process is simply the lender and the borrower renegotiating the terms of their original agreement. It may mean changing the terms regarding interest rate (you may be eligible for a lower rate, the length of the loan (the number of years you can take to pay it back), or making adjustments to fees and charges you may have incurred with relation to your loan.
If you are trying to become a qualifier for a home modification loan program, there are several questions you should ask yourself.
1. Are you having a hard time making your mortgage obligation every month?
Demonstrating hardship is one of the factors used in determining your eligibility for a home mortgage modification program. Factors such as losing your job, having a significant reduction in your pay, suffering from a major health problem or other unforeseen circumstances of life are all taken into consideration by the lender. Because these lenders are inundated with requests, the key is to be able to present your situation in an organized and conclusive manner that will be more likely to given consideration by the lender.
2. Have you been late with a monthly mortgage payment?
If you have been late on a payment for your home loan a refinance mortgage will be harder to get. Being late on a monthly payment obligation will affect your ability to qualify for a refinance mortgage. However, it is the perfect time to consider modifying the terms of your original loan through a modification program.
3. Is your current lender threatening to foreclose on your existing mortgage?
If your current mortgage holder has contacted you about beginning foreclosure proceedings or you have received a foreclosure notice, you definitely need to think about modification of your existing home loan. A refinance mortgage would be nearly impossible to obtain at this stage of the game. Nevertheless if you are armed with the correct information, you still have a good chance of qualifying for a modification of your current home loan which could save your home from foreclosure.
It is important in this circumstance not to give up without a fight. It is easy to be intimidated by the mortgage lender, but keep in mind that the lender is also threatened by the growing number of foreclosures. It is also in their best interest to work with the current borrower toward a common goal of keeping the existing home loan in good standing. If you present yourself properly, the lender may be very attentive to you as a distressed homeowner.
During the modification process, it is also feasible to have any fees and charges that you have incurred forgiven by the lender and have your loan reinstated.
4. Have You Already Talked to Your Lender about a Home Loan Refinance Mortgage or a Loan Modification?
If you have had a chance to talk to your lender regarding a home loan refinance mortgage, you may decide it isn't the best option for you at this point. A home loan refinance mortgage could lower your interest rate or terms, but the cost of doing the refinance can be quite high and the qualification may be steeper than they were on your original loan.
If you have already contacted your lender about loan modification and have been brushed aside, it may still be possible to get the negotiations back on track. The average homeowner may not know the best way to make a presentation to the lender. This does not mean you need to hire a loan modification service or an attorney, both of whom can charge very large fees. It does mean, ultimately, that you may need some guidance navigating through the process yourself.
5. Do I Have to Hire Someone To Do My Loan Modification?
Mortgage lenders actually say that they trust the necessary modification paperwork that is prepared by an individual as opposed to a hired professional. You will have to supply the details either way. You are the only one who can decide if it is worth it to hire an outside service, but keep in mind it is certainly an option to do the modification yourself. So if you are willing to take a little time and educate yourself, you might save yourself several thousand dollars.
Even though the exclusions and qualifications are very restrictive, it may be worth checking into.
The Bottom Line:
Educate yourself. Don't wait too long to take action. And above all, realize you do still have options.