Many people that I talk to today fall into one (or more) of the following categories:

  • They can’t afford their current mortgage payment

  • They currently owe more on their mortgage than their house is worth

  • They have been declined for a mortgage recently

So I thought I would share a few options for people who are in one of these categories and are not currently in a FHA or VA loan.  If you are in a FHA or VA loan, there may be a possibility that you could streamline your mortgage and not need a new appraisal — but by and large, the people I talk to who are having problems are not in an FHA/VA loan.

What to do if you consider yourself to be in “mortgage-related trouble” and want to stay in your house?

Option #1 – Do NOT panic!

I know, this is easier said than done, but this is a business transaction that you must take care of or it will usually get worse.  The earlier that you get through the emotional part and get on with the logical business part, in general, the better the end result will be.

Option #2 speak with your current lender and inquire about a “Short” refinance

These are not usually well-understood by loan officers and they take quite a bit of time and effort to do.  A short-refinance works very similar to a short-sale — but think of it like you are the one buying your house.  Generally speaking, the lender will reduce a payoff that is 90-95% of your home’s current appraised value.

A short-refinance is basically the same thing as the upcoming FHA Hope for Homeowners program on October 1.

Confirm that your loan is or is not owned by Fannie Mae or Freddie Mac.  (Click the links and follow the instructions).  If it is owned by Fannie/Freddie, explore the options for the MAKING HOME AFFORDABLE or HAMP programs with your current lender.

Option #3, ask your lender if they can help you with the FHA Hope for Homeowners program.

According to CNN/Money many lenders are not happy with the new FHA Hope for Homeowners program and instead of participating in this program, they are offering people loan modifications instead.  I want to emphasize that each situation is different and it depends on what your overall situation is as well as who your current lender is — so the key is to pick up the phone and start talking to your current lender about your options.

Option #4 contact a HUD-Approved housing counseling agency.

These HUD-approved housing counselors help people with getting loan modifications for free.  Depending on where you live, there is usually a housing counselor nearby and they can help you understand your options and work with the lender to “fix” your situation.

Option #5 contact a for-profit loan modification company.

There are many companies out there who will help you work with your lender to modify your loan for a fee.  These fees are different for each company, and I do not know their exact fee structures — but I will say that I usually see their fees in the thousands of dollars.  When someone asks me for a referral for a loan modification company, I point them to LoanSafe.org, but there are many others out there who perform similar services for similar fees.

Option #5.1 If you are out of options, start considering other alternatives besides living in your current home.

If you have gone through the first five options and find yourself in a situation where you cannot afford your mortgage payment, you need to consider a short-sale before foreclosure happens.  A short-sale is ALWAYS much better than a foreclosure.

 

Resources

Mortgage Payments Sending You Reeling? Here’s What to Do

Mortgage Payment Problems: What If You Can’t Pay?

What If I Can’t Afford to Pay My Mortgage Payment?

can’t pay my mortgage loan. What should I do?

What to do if you can’t afford your mortgage 

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