If you find you can’t make your payments, see if you qualify for new loan-modification or refinancing programs.
Despite recent glimmers of hope that the economy is improving, news on the housing front can be getting worse for homeowners who have lost a job, or had wages and benefits trimmed. Dipping into savings isn’t always the best strategy and can leave you with little in reserve for new emergencies.
If you are in this difficult situation, don’t despair. There are options that might help lower your mortgage payments and keep your other assets intact: loan modification or mortgage refinancing, part of the Obama administration’s housing plan. (Full details at makinghomeaf-fordable.gov.)
Loan modification might be an option if your monthly mortgage payment, real-estate taxes and homeowners insurance exceeds 31 percent of your monthly income. Your lender can reset payments to the 31% threshold by reducing your interest rate to as low as 2%. Your loan’s term could be extended to up to 40 years or payment on the principal could be deferred. The new payment will be in place for a three-month trial period and if you pay on time, it can be extended for five years.
To qualify for mortgage refinancing, you need to have a steady income, so if your financial woes are the result of a job loss rather than a drop in income, you should try to find another job right away. Even homeowners who are underwater—that is, they owe more than the home is worth—are eligible to refinance. The government recently expanded these guidelines, allowing refinancing of up to 125% of the property’s current market value.
Most important, don’t fall for a scam. Some “foreclosure res-cue” companies ask you to sign over the deed to your home or pay the mortgage directly to them while they work on resolv-ing your problems. Never give anyone else the right to your deed, don’t sign any contract unless you under-stand it, and pay your mortgage only to your lender dur-ing any remodifica-tion process.
If you’re in trouble, make an appointment with the local Consumer Credit Counseling Agency and talk to your lender right away!
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