Tag Archive for 'Foreclosure'

If you have bad credit, mortgage lenders are hard to come by these days. But that doesn't mean you have no hope of getting a better deal on your home loan. If you have a bad credit mortgage, mortgage rates may be much lower than the rate on your current mortgage. As long as you have some home equity, you may be able to improve your situation.

First, complete the form on this site to see where you stand. You won't be required to provide personal information, and you will be able to see what kind of bad credit refinance may be available to you. You may even qualify for an FHA refinance and much lower mortgage rates.

Second, call your current mortgage lender. See if your lender might be able to offer you a better deal to keep your business. The cost of refinancing this way may be lower; a lender that keeps your loan in-house (has not sold it to another firm) may be able to streamline your application with no appraisal.

Third, see if you qualify for a mortgage modification. If your credit isn't good enough to get a refinance, and your house payment (principal, interest, taxes, and insurance) is more than 31% of your gross (before tax) income, you may qualify to get your mortgage interest rate reduced for free. Try the HOPE LoanPort for faster decisions. Lenders that are members of the HOPE NOW coalition work through the LoanPort to render faster help to qualifying homeowners. The self-assessment on the site can help you see if you might qualify for a mortgage modification and keep your home out of foreclosure.

If you lost your home through a short sale or deed-in-lieu of foreclosure, you may not have to wait five years before you are eligible to finance your next home.

Fannie Mae is directing its lenders to relax rules making mortgage applicants who have done short sales or given up their homes with deeds in lieu of foreclosure ineligible for a new mortgage for many years. Instead, you could be eligible for Fannie Mae financing in as few as two years. The new standards go into effect July 1st.

Homeowners who have done short sales -- for example under the Home Affordable Foreclosure Alternatives program (HAFA) -- may be able to qualify for a mortgage in just a couple of years. The purpose of this is to push troubled homeowners to work with lenders and avoid costly foreclosures. While the hit to your credit score is the same whether you do a short sale, deed-in-lieu, or get foreclosed on, the new rule means you gain an advantage if you avoid foreclosure.

There are catches, however. To qualify for a new loan in two years, you'll probably have to put at down least 20% down. With 10%, you have to wait four years, and with less than that it may take even longer.

But, wait, there's more. If you can prove that your mortgage credit problems stemmed from extenuating circumstances, like job loss, medical expenses, or divorce, you might get a loan approval in two years and put only 10%.

Freddie Mac, Fannie's counterpart, works a bit differently. If you can't cannot that extenuating circumstances caused your financial problems, Freddie Mac won't approve a new mortgage in under four years. If you lost your home because you bought too many toys or took too many vacations, Freddie makes you wait five years.

If you're experiencing mortgage credit problems, have missed home loan payments, and are perhaps delinquent on other credit accounts as well, it may be tempting to give up. The stress can be debilitating, the balances pile up, and you think you will be in bad-credit Hell forever. A recent study by VantageScore shows that's not necessarily the case.

It's true that missing a mortgage payment does a lot more damage to your credit score than being late on a credit card account. And getting into default can drop your score by as much as another 120 points. But a talk with your lender, preferably as soon as you get into trouble, can help you stop the bleeding. The study found that borrowers whose lenders were willing to capitalize their late payments, that is, bring the mortgage current and roll the arrearages into the loan, improved their credit scores. The mortgage was no longer delinquent and there was no foreclosure.

Others who went into trial mortgage modifications had mixed results. If they were current on their loans at the start of the trial period, the lenders did not report them as late. And if a permanent mortgage modification (which caused the score to initially drop 100+ points to about 600) made it possible for them to begin paying all of their obligations on time, their scores often rebounded to 700 in nine months.

Borrowers who were offered principal reductions in their mortgage modifications also got mixed results, depending on how the loan was reported. If it was left alone, with the same start date and initial balance but the current balance reduced, the credit score tended to increase, because the homeowner still had an aged account with a lower balance. However, if the account was treated like a mortgage refinance with a new start date and balance, the score went down. This effect was even more pronounced if the mortgage was reported as settled for less than the amount due.

Those who let their homes go into foreclosure, negotiated a short sale, or returned the property with a deed-in-lieu of foreclosure all suffered the same amount of credit score damage. And finally, those who filed bankruptcy took the biggest hit of all. However, borrowers with perfect credit saw their scores drop as much as 365 points, while borrowers with credit problems already (score 625) only took a hit of 110 points. The moral of the study? Address your credit problems early, then do what you can to recover. It needn't take that long.

Whether you have bad credit or not, your mortgage may have become too much for you. You tried for a mortgage modification and didn't get one. The nightmare of being hounded for payment and ultimately foreclosed on (you get your name in the paper, too) and evicted is more than you can bear. Is there another way out? Yes, there is.

Federal and mortgage industry officials are trying to find ways to get distressed borrowers to leave their homes voluntarily, avoiding expensive foreclosures and messy evictions. Citigroup is trying a new program in some states that would allow defaulting borrowers who don't qualify for or don't want mortgage relief the chance to stay in their homes up to six months for free in return for maintaining the property. Bank officials estimate that up to 20,000 homeowners in Texas, Florida, Illinois, Michigan, New Jersey and Ohio could take advantage of the offer.

It makes sense for them to do this -- if they foreclose, lenders pay attorney fees and other costs they are unlikely to recover. Then they have property on their books that they have to maintain, protect against vandals, and market under desperate circumstances. It makes sense to keep a family in there to take care of the home and perhaps make selling it easier. Neighborhoods benefit too -- they look less blighted when there aren't gazillions of vacant homes, and the criminal element that vacancies attract stays away.

If you have a Fannie Mae or Freddie Mac mortgage, you may not have to move. Fannie Mae and Freddie Mac allow former homeowners to rent their homes after a foreclosure or turning over a the deed to their home. And there are short sales -- as part the Making Home Affordable program, lenders are eligible for $1,000 in exchange for allowing borrowers to sell their home for less than the amount owed -- and forgiving the deficiency.

It's fairly common knowledge that bankruptcy can drop your credit score by hundreds of points and render you ineligible for a new mortgage for several years. You may have resigned yourself to renting for the foreseeable future. But you might not have to.

The reason for your bankruptcy filing has a big influence on how much grief lenders will give you about your next home purchase or refinance. For example, FHA's guidelines normally require that you put at least two years' distance between your mortgage application and your bankruptcy discharge. You will also have to prove that you have established good repayment habits and demonstrate financial responsibility, preferably by saving some money.

But FHA allows some applicants to be approved as soon as 12 months after filing for bankruptcy! FHA's underwriting guidelines state that:

"An elapsed period of less than two years, but not less than 12 months may be acceptable for an FHA-insured mortgage, if the borrower
?? can show that the bankruptcy was caused by extenuating circumstancesbeyond his/her control, and
?? has since exhibited a documented ability to manage his/her financial affairs in a responsible manner.

In addition, a Chapter 13 bankruptcy is treated more leniently than most Chapter 7s, as you are making a commitment to repay some or all of your obligation. FHA says:

"A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage, provided that the lender documents that
?? one year of the payout period under the bankruptcy has elapsed, and
?? the borrower’s payment performance has been satisfactory and all required payments have been made on time.

The borrower must receive written permission from the court to enter into the mortgage transaction.

Note: The lender must document that the borrower’s current situation indicates that the events that led to the bankruptcy are not likely to recur."

However, don't expect any mercy if your difficulties were the result of laziness sending your payments or financial mismanagement. To catch a break from an FHA lender:

* Document the cause of your financial difficulty (a medical emergency? unemployment?).

* Prove that the problem has been solved (for example, your medical bills were discharged in the bankruptcy, your income is sufficient to cover your expenses, and you can show that you have paid your bills on time).

* Demonstrate that you have taken steps to prevent the same difficulty recurring (you have purchased medical insurance).

And keep in mind that FHA has this to say about people who don't have a good excuse for their bad credit:

"If a borrower’s credit history, despite adequate income to support obligations, reflects continuous low payments, judgments, and delinquent accounts, significant compensating actors will be necessary to approve the loan." Remember that FHA, like God, only helps those who help themselves.

FICO has finally disclosed how much late payments, maxed out credit accounts, or more serious mishaps can damage your credit score. You know paying late is bad for your score, but now you know how bad. Paying thirty days late can drop your score 60 to 80 points. Even if you pay on time, maxing ...

Yes, rates are low. And if you are paying over 6% on your mortgage, you should probably look into refinancing and saving some money. However, not everyone who could benefit from refinancing will be able to do so. Here are three reasons you may not be able to refinance--and what you can do about them. I. ...