Many homeowners today are finding themselves in a situation where they can no longer afford to pay their mortgage. Perhaps they lost their job or because of the economy their income has been greatly reduced. Perhaps they had an adjustable rate mortgage and could no longer afford to make the payments once their interest rate increased. Or perhaps they simply bought more home than they could have been realistically able to afford. If you are a homeowner in this situation, where should you turn?
The Homeowner Affordability and Stability Plan
The government’s new plan, which was unveiled last week, is supposed to help 7-9 million homeowners stay in their homes. However, many, including supporters of the President , have criticized the plan, stating that it is not designed to help home owners who need it the most. Their are two components to the plan - the refinance portion and the loan modification portion. The refinance portion is only available for homeowners who owe up to 5% more than their home is currently worth , have a loan guaranteed by Fannie Mae or Freddy Mac , and are not currently behind or their mortgage. The modification portion is available to homeowners who are behind on their mortgage, regardless of whether the loan is guaranteed Fannie or Freddie. Please note, that while the government is offering incentives for lenders to participate in this program, it is completely voluntary. Furthermore, it is anticipated that there is going to be a backlog at most lenders, as homeowners are rushing to try to take advantage of the program, so if you are in danger of losing your home, you may not get immediately relief. This program is also only available to borrowers with conventional mortgages, therefore it will not help the many homeowners with FHA or VA loans.
Refinance your Loan
If you do not owe more than your home is currently worth and are not behind on your payments but are still feeling the pinch, it is possible to refinance you loan, either through your current lender or a different lender. Please note that not all lenders offer the same types of loan products so it is possible that you may be turned down by one lender yet approved for a loan with another. Ideally you want to shop with a lender that has access to a full range of products, including government sponsored loans like FHA.
Loan Modifications
There are many companies out there that are offering loan modifications. Many charge a hefty fee and promise results that they are not able to attain. Yet there are also companies out there that are legitimate and can help you save your home. The problem is that it is difficult to ascertain the good from the bad.
There are also those who are of the opinion that homeowners should contact the lender and attempt to get a loan modification themselves. However, unless you are able to get a hold of the correct department or speak to the right person you may not get very far. Besides, most banks are not staffed to handle the current flow of customers who are seeking loan modifications, if you search the interent you will read countless accounts of files being lost, agreed upon terms being changed, and general frustration with the overall process.
I’m Still Confused. Which is the Right Option for Me?
Please note, the options listed above were made assuming that you wish to stay in your current home. However, you may wish to sell and in that case you should contact a Realtor, preferrably one with experience in shortsales in the event that you owe more than your home is currently worth. Other options include deed in lieu of foreclosure (basically giving the home back to the bank - contact your lender). This option will have a negative effect or your credit although it is not looked at as bad as a foreclosure.
If you can no longer afford to pay your mortgage, your best bet as a first step is to contact your current lender and try to work something out with them. They will best be able to tell you if you are able to take advantage of any of the three options listed above, either the govenment’s new plan, a loan modification, or a loan refinance. If you current lender is unable or unwillling to help, or perhaps is just too busy to be able to help you, then the next step is to contact us. As mentioned before, not all lenders offer the same types of loan programs, therefore it pays to get a second opinon. You may still be able to refinance you loan, even if your current lender turns you down. If you do not qualify to refinance, we can refer you to legitimate companies that can help you modify your loan, so that your payments are more affordable.
If you have any questions on how you can make your mortgage loan more affordable and keep your home, feel free to contact us.
