Millions of homeowners are having difficulties keeping up with their mortgage. Here are several options that can help beleaguered homeowners. Understand these options and identify which is best for your situation.
Mortgage Loan Modification
With mortgage modification, the lender will modify the terms of your loan. You can get several modification plans from the lender. The lender might lower your interest rate or will fix the rates if your mortgage has adjustable rates. The lender can also extend the term of the loan from 30 to 40 years. The lender will try to reduce your monthly repayments to 31 percent of your gross monthly income. If you want to take this option, then you need to contact your lender. You should inquire if you can be considered for the Home Affordable Modification Program. This is an ideal option if you are employed.
Forbearance
Another option is forbearance. Your lender will calculate all the past dues with fees. The total amount will be divided into smaller payments. The aim of this plan is to let you catch up on your late payments. Do take note that you still need to pay the regular mortgage payment on top of the forbearance scheme. To get this option, you need to present to the lender compelling reasons why you were late on your payments. You must also show that you now have the capacity to make regular payments.
Short Sale
You can short sell your home even if you owe more than its current value. You can sell with an agent and the lender pays the commission of the agent. The selling price needs the approval of the bank. You must show three important things to proceed with this option. First you have to show that you have no assets. Second, you must show that you have a hardship like a job loss, death in the family, divorce, illness, or monthly payment increase. You have to show that you will experience difficulties if you do not short sell. Some lenders might encourage you to modify the mortgage instead of short selling the house.
Deed In Lieu of Foreclosure
This is also known as friendly foreclosure. It is very difficult to get an approval for this option. If you get an approval, the lender will allow you to send the keys. You will also be allowed to sign the deed to the bank. You have to take note that this option can adversely affect your credit. It is very important to talk to your lender so you can understand the entire process. At some point, the bank can pursue you for deficiency judgment.
Deed for Lease
This may apply to loans backed by Fannie Mae and Freddie Mac. The lender will allow you to sign over the deed and rent the property back. Rental rates can be negotiated with this option.
If you are late on your mortgage payments, call your lender as soon as possible. Tell the lender about your financial hardships. You can explore different options that could help solve your problems.
Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like New Jersey Mortgage Brokers and Lenders and provides reviews of national companies like Aegis Mortgage.
