Q. Moe, I am trying to save my home of 13 years in Southern California. I would like to refinance my house in order to make my payments more affordable. It still has about 10% equity, but I am in foreclosure. Do you think I can obtain a mortgage in my current situation?
A. Unfortunately, with only 10% equity, it would be impossible to refinance your home while it is in foreclosure. When a borrower is in default on their current loan, their only source for financing would be what is called a "hard money loan." These type of loans are usually only available to people with a lot of equity in their properties. These type of lenders are looking for homeowners who have at least 50-60% equity or less in their property.
So, this is not an option for you at this time. Since you are in default, you need to start looking for help now before it is too late!
Before your home is foreclosed on, there a couple of things that you can try in order to save your home and buy a little more time before things get more complicated. What you need to do is start computing what you need to cover the necessary costs of your mortgage, any past dues, as well as any penalty fees resulting from being behind in your payments. Trying to find a lender will be a complete waste of time and that is what you do not have a lot of right now.
- So your best bet is to negotiate with your existing lender to restructure the loan.
There is a popular home saving method being used by struggling homeowners right now. It is called a loan modification. This is when your current lender agrees to assist you by reducing your current interest rate on your loan down to affordable levels. They may also work with you on any late payments and fees you may owe them. A loan modification can help you to readjust your monthly payments to something that you can handle and get things caught up. Some lenders may even take your past obligations and put them at then end of your restructured loan payments so that you are kept up to date again.
Remember to discuss all possible options with your mortgage servicer and act fast while you still have time.
There are some HUD approved non-profit hsouing counseling agencies you can call for free help with your mortgage. You can try www.995HOPE.org, 888-995-HOPE or www.NACA.com. These agencies can help you with paperwork and in dealing with your loan servicer. You can also join our forum with over 30,000 other homeowners who are helping one another through the foreclosure process. Please join and share your story.
If you are having other debt issues, you should consider working with a non-profit credit counseling firm in your area. Credit consolidation will allow your credit counselors to negotiate on your behalf with your creditors and combine all your monthly debt obligations into one monthly fee. Credit consolidation services even help you get caught up with your other bills as well and is something many banks are open to.
Remember to act fast. Refinancing a home in foreclosure is almost impossible right now. You need to attempt a loan modification before it is too late.