How Can I Avoid Foreclosure?
If you’re behind on your mortgage payments, you might be wonder what options you have for getting current on payments and staying in your home. There are two options lenders have for homeowners who have gotten behind on payments. These options are refinancing your home or loan modification.
Refinancing Your Home
Refinancing your home can help you avoid foreclosure by taking advantage of the equity you’ve already put into your home. With a rate and term refinance, you go to your lender and ask for a new loan that only covers what you currently owe on your home. Because this loan is less than the original loan than you took out, the payment could be lower--but not always. If you bought your home during a time of historically low interest rates, refinancing may not impact your monthly payment. On the other hand, if you have additional money to put down when you refinance, that could help. Property taxes, insurance, and interest rates all impact your payment, so talk to a HUD-Certified Housing Counselor about the specifics of your situation before refinancing.
Refinancing your home isn’t as simple as adjusting your loan amount--to refinance you almost have to go through all the steps you went through to get your mortgage the first time. You’ll have to gather all your financial documents, like tax statements and W2s again, and apply for a new loan. You’ll need to lock in an interest rate and go through underwriting. Your home will need to be appraised to verify its value, and you’ll have to go through closing.
Because refinancing involves getting a new loan, your credit score can be a big factor. If you want to refinance your loan as a way to avoid foreclosure, you need to act fast and not get too far behind on payments. Talk to one of A.R.C.'s HUD-Certified Housing Counselors today.
