- Immediate action can trigger a quick response from your home loan lender, perhaps allowing you to reach a solution before you're at risk of losing your home to foreclosure. According to Bankrate, lenders start the foreclosure process once delinquencies are 90 to 105 days old. Don't wait until a lender threatens foreclosure to find a reasonable solution. Talk with your lender's loan hardship department once you realize you cannot afford the loan.
- Modified mortgages, which involve lowering the rate or changing the terms to create a lower monthly payment, are one solution to creating an affordable home loan payment. This provision helps borrowers who have enough income to make a mortgage payment, but can't afford the current amount. Borrowers with adjustable-rate mortgages or interest-only mortgages may need a loan modification because the interest rate on these loans can increase, thus increasing the home loan payment. Modifications also help borrowers deal with a drop in earnings. Each lenders has its criteria for determining eligibility. Discuss requirements with your lender.
- Loan modifications were created to help borrowers who experience financial hardships. Because some lenders only work with borrowers who have already missed a payment, having a mortgage in good standing (current on payment) may disqualify you for a modification. However, borrowers who need a lower mortgage payment may be able to refinance their mortgage to obtain a lower rate. According to Bankrate, refinancing typically requires a credit score of 680 or higher and a home loan-to-value ratio of 80 percent (20 percent equity) for a conventional loan. Loan-to-value ratio is the remaining balance of your existing mortgage loan relative to the current market value of your home. Some lenders offer products to accommodate borrowers with less equity, such as FHA refinancing and government refinance options. Borrowers who meet the lender's requirements can receive a new mortgage with new terms, which can include a lower mortgage rate and lower monthly payments.
- Selling the house is another solution if you're unable to afford a mortgage loan. Sometimes, refinancing or getting a modified mortgage doesn't produce the needed results, and selling the home is the best option to avoid foreclosure. To help find a buyer quickly, or if you owe more than the home's worth, discuss a mortgage short sale with your lender. Lenders occasionally approve short sales when borrowers desperately need to sell their homes. A short sale lets a property owner sell his home for less than what's owed on the mortgage. Depending on the agreement reached with the lender, a short sale may release the borrower from the obligation of paying the remaining balance on the mortgage.
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