A better solution is a loan modification with your existing lender. This is when the terms of your existing mortgage are altered to produce a lower monthly payment. In reality, it is just like a refinance, but your credit and equity are not a large determining factor, like a refinance. In most cases, the interest rate is reduced and the term of the loan is re-amortized to a 30 year fixed rate. In some cases, the principal loan amount is even reduced to reach the target payment.
In some cases, simply asking your lender for a loan modification will work. But more often than not, you will need to hire a professional bargainer to work on your behalf. When you hire a professional, make sure you do not pay cash up front, or if you do, it is placed into an escrow account until the case is complete. If you do not get results, you should not have to pay for their efforts! Do your research and be careful not to get taken advantage of. New laws are in place to protect borrowers, but criminals will always be there to steal your money if you allow them.
When negotiating with your lender, you will have to complete a loss mitigation package when attempting your loan modification. This will help them ascertain your qualifications. This is where a professional will come in handy, since getting rejected can be irreversible. It is important to submit a package that is complete and can be approved without delay. You may be asked to demonstrate proof of income, as you did when you obtained the original loan. Whether or not things have changed with your income is one of the things that the companies will look at.
If the value of your home has fallen and you are "underwater" in your loan, then you need to decide if keeping your property is even the best decision. As I said earlier, you may qualify for a loan modification with a principal reduction, but selling the property may be your best bet. When you are underwater in your mortgage, a short sale can be an easy way out. A short sale is when the property is sold for less than the total amount and the bank forgives the difference.
Short sales can be tricky anyway, because your lender will not easily agree to this solution and may pursue a deficiency judgment after the home sells. It is very important to get your agreement in writing and to make sure they waive their right to pursue this deficiency judgment at a later day. We never recommend borrowers attempting a short sale on their own. Professional short sale negotiators or real estate agents specializing in this type of sale are available at little or no charge to the borrower, so take advantage and make sure your rights are protected.
Regardless of what you decide, it is important to know that you have options and allowing the property to go to foreclosure is rarely a good idea. Your credit will be ruined for the next decade and buying a new home will be virtually impossible unless you have recuperated. Do not be afraid to ask for help or retain a professional to help you through these rough times.
Article Source: http://www.moneyarticlelibrary.com
