How to Avoid Foreclosure
Homeowners usually purchase or rent a home when they feel they are financially ready. Owning a home requires consistency in regards to your financial means. It’s not just the closing costs and the monthly mortgage payments: it’s also the maintenance, insurance, and many more factors that surround owning your home. So, in today’s economy, how can one stay stable with their payments? How can a homeowner avoid getting kicked out of their home and having it put right back on the market?
Getting your home foreclosed on not only damages your credit and financial health, but also causes you to lose your rights to your home. Avoid foreclosure by any means possible as best as you can by accepting the financial responsibility and doing everything you can to stay current.
However, life happens, and unexpected situations arise. If ever you should find yourself in a financial pickle, there are a few steps you can do to save yourself from the catastrophe of losing your home.
Communicate with Your Lender
The sooner you discuss your financial problems with your lender, the faster a solution can be processed. There’s no need to feel embarrassed or scared, because your certified lender can help determine different programs and options that may benefit you in your time of debt. This gives your lender an opportunity to work with you and establish a plan. Doing so can quickly avoid foreclosure on your home. It also engenders good faith between you and your lender. Communication is key!
Consider Working with the MHA Program
As of 2017, the Making Home Affordable (MHA) Program will be coming to an end. If possible, take advantage of this opportunity; as this not only benefits you, but also stabilizes the country’s housing market and improves the nation’s economy. Joining the MHA program allows homeowners to lower their monthly mortgage payments in exchange for lower loan rates. Features of this program typically benefit homeowners for whom ownership is no longer affordable or desired, as well as unemployed homeowners, and those who owe more than the home’s worth. The following are different MHA programs composed for each struggling homeowner:
- Principal Reduction Alternative (PRA): designed to help homeowners whose home worth is less than their amount owed on the property. Doing so strongly encourages servicers and investors to reduce the amount owed on the property.
- Home Affordable Modification Program (HAMP): lowers the homeowner’s monthly mortgage payment to 31% of their verified monthly gross (before tax) income in the effort to make their payments more affordable.
- Second Lien Modification Program (2MP): designed for homeowners whose first mortgage was permanently modified under HAMP and have a second mortgage on the same property. If eligible, the homeowner may qualify for a modification or principal reduction on their second mortgage under 2MP.
- Home Affordable Refinance Program (HARP): for homeowners who are current on their mortgage payments although the value of their property has declined. Since the value has declined, the homeowner is unable to retain a traditional refinance. Having this scenario enables homeowners the ability to refinance into a new, affordable, more stable mortgage.
Refinancing Your Mortgage
Refinancing is when a customer satisfies a debt by proceeding with another loan on new terms. This is done by having the homeowner pay off their existing mortgage and taking out a new mortgage.
A common mortgage value is when the homeowner’s balance for the mortgage loan is higher than the actual property’s value. The following are MHA programs suitable for this homeowner’s debt:
- Home Affordable Refinance Program (HARP): available for homeowners whose property value has declined and is lower than their actual mortgage amount. Partaking in this program allows the homeowner to refinance their mortgage into a newer more affordable, and stable mortgage.
- Treasury/FHA Second Lien Program (FHA2LP): recommended to homeowners whose servicer of the first mortgage is willing to participate in a FHA Short Refinance along with having a second mortgage.
- Principal Reduction Alternative (PRA): designed to encourage servicers and investors to reduce the amount owed on the homeowner’s home. This is commonly used with homeowners whose homes are worth significantly less than what they initially owe.
Apart from the above-referenced programs, there is also assistance for homeowners who are unemployed. Most can qualify for the programs by having their payments either minimized or suspended. An example would be the Home Affordable Unemployment Program (UP): unemployed homeowners can receive assistance with this program by having their mortgage payments temporarily deducted or suspended for at least twelve months while the homeowner seeks re-employment.
Whether you, or a loved one of yours is going through property problems, there is usually an option available to provide relief. All it takes is the willingness to fight for your home, and some careful research on your part. When in doubt, you can always consult with a qualified real estate attorney to ensure that you are taking the best course of action for your unique situation.