Tag Archive for 'mortgage modification'

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'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.

Yes, Indiana homeowner Lisa Stuart almost lost her home because she didn't know about an unwritten HAMP rule. She was put into a trial modified mortgage and set her account up to automatically make the payment on the 25th of the month. She was concerned that if she set it up to transfer on the 1st, when payment was due, that it wouldn't be credited because one of the trial payment due dates fell on New Year's Day. But GMAC mortgage wasn't impressed by her responsible attitude. Their collection department called her to tell her that she owed them $4,000 of would be foreclosed on, and that she has been kicked out of HAMP for making her payment too early. And that's not the only secret rule that can get you kicked out of the program.

Take your current housing payment -- principal, interest, taxes, insurance, HOA dues, and mortgage insurance -- and multiply it by three. If you have $1 more than that amount in your bank accounts, your trial modification will not be made permanent and the collection department will call. When one lender, Aurora Loan Services, was asked by a homeowner I know, "Well, you say we have $8,000 too much to get a modification, but the collection people want $9,000 from us. If we pay that, we won't have too much money. So can we then get a modification?" The representative answered profoundly, "I don't know."

A quick search on the Internet shows that many people are under the mistaken impression that "reserves" means the amount needed to pay all of your debts. But mortgage lenders don't care about your other debts, and they have no problem with you being unable to repay your other creditors, as long as you can pay your mortgage. reserves, for the purpose of mortgage modification qualification, is only amounts needed to pay your for housing for three months.

So my advice is that if you have too much money to qualify for a modification, consider using the excess to pay off other debt and get yourself some breathing room. It will make it easier for you to get your mortgage modification, and easier for you to honor your modified mortgage obligation in the future.

If you have an interest-only mortgage and you've been making the payments for a few years, you need to take another look at your loan, grab a mortgage calculator, and start working on your future. Your payment may be about to go up. A lot.

Interest-only mortgages were popular because they allowed borrowers to get the same house but make a smaller payment. But after five years, most loans re-cast, or reamortize the balance, and the resulting new payment could be ugly.

For example, if you have a $400,000 mortgage at 6% (the going rate for those things a few years ago), your interest only payment is $2,000 a month. But after 5 years, you have the entire $400,000 balance and only 25 years left to repay it. Throw those figures into a mortgage calculator: $400,000 balance, 6% rate, and 25 year repayment period, and you get a payment of $2,577 a month! Yikes. If this is going to be a problem, now is the time to look into refinancing your mortgage. If you have bad credit, refinancing may be a real challenge. If you don't qualify for a refinance (many bad credit mortgages aren't owned by Fannnie Mae or Freddie Mac and so don't qualify for government refinancing), you need to look into a mortgage modification.

What should you do? First, take your new payment, including principal, interest, property taxes, and homeowners insurance, and divide it by your monthly income. In this example, you have a payment of $2,577, add taxes and insurance (we'll say they are $273 a month) for a total of $2,850. If you5 income is $7,000 a month, divide $2,850 by $7,000. You get 40.1%. That means you could qualify for a mortgage modification.

Now, take your income of 7,000 and multiply it by .31, or 31%. This is what your total housing payment should be. You get $2,170. Subtract your taxes and insurance of $273 and you get a principal and interest payment of $1,897. This is what you should be paying to have a mortgage that would be considered affordable.

Now, start playing around with the mortgage calculator (this is actually kind of fun). Under Making Home Affordable, lenders first reduce your interest rate to as low as 2%, and then if that doesn't get your payment low enough, they will stretch out your loan to a 40-year term. In this case, you can get your payment down to $1,880.95 if your rate is 3.875%.

Now that you know what you're dealing with, contact your lender--you don;t have to have a mortgage credit problem or missed payments to get a modification. You do have to document that repaying your mortgage as agreed will cause you hardship. And an increasing payment qualifies as a reasonable cause of hardship. You may be offered a trial modification while you get your documentation together and your lender determines if you qualify for a permanent modification. Don't miss any deadlines, and make the new payment on time if you have to beg in the street to do it!

There is no reason that you have to wait until you have serious credit problems before asking for a mortgage modification.

I have spent hours searching online and have come up with zip. If you have bad credit, home loans seem to be out of your reach right now. Any search of sub-prime mortgages, bad credit mortgages, high risk mortgages, home loans for people with bad credit, or bad credit refinance comes up empty these days. But you still might have some options.

Hard money lenders are popping up to take up some of the slack created by the exit of most subprime lenders from the marketplace.

What Is a Hard Money Lender?

A hard money lender is any person or group of people who has money available for investment, usually in real estate. The amount of money available varies, and so does the criteria for lending. Loans available from hard money lenders are usually short-term, though, so you'd want to improve your credit rating as quickly as possible so that you can eventually refinance with traditional financing.

Despite its name, "hard money" isn't that hard to find. The terms, however, are ugly--toad-on-a-birthday-cake ugly! The financing comes from private individuals who need to profit as much as possible in order to justify the risk they take lending to you, the bad credit borrower. The terms are draconian--several points upfront and rates about 6% higher than what you'd get as a prime borrower from a national lender. In addition, you need a hefty down payment or a ton of equity to even be considered for financing.

Hard Money Alternative

If you actually have a huge down payment and enough cash to pay several points in fees, try a conventional lender first. Even bad credit can sometimes be offset by a great equity position and good income. It only takes a few minutes to see if you stand a chance at getting an approval as these loans are underwritten electronically.

Refinancing with Bad Credit

If you have a clean credit history for the last 12 months and no foreclosures within three years or bankruptcies within two years, take a shot at FHA. Even if you are declined, your loan officer should be able to tell you what you need to do to get qualified for an FHA refinance. Then put yourself on a budget and plan for a better mortgage.

Unable to Get a Bad Credit Refinance? Try Mortgage Modification

Want a free refinance--to a 2% rate? That's a mortgage modification. If your current housing payment (PITI) is more than 31% of your gross (before tax) income, you may qualify for one from your lender or loan servicer. Check with www.makinghomeaffordable.com for more information. Then contact your lender to get a trial modification. Get all the paperwork your lender asks for (its worth paying an accountant to help you if the forms are too much trouble) and be sure to make your modified payment on time if you want the new arrangement to be permanent. For homeowners with bad credit, a modification is probably easier to obtain than a refinance from a bad credit mortgage lender today.

You and your lender are talking mortgage modification. You have a $300,000 mortgage on a $200,000 house. You're paying 6% because you can't refinance to a better interest rate. What would you rather have the lender do, drop your interest rate to 2% or your balance to $200,000? Most borrowers would take the $200,000 balance. ...

If you don't have enough cash to make your entire mortgage payment, but could pay some of it on time, does the lender have to right to refuse your payment and give you a bad credit rating? Unfortunately, yes. If you make a partial payment, then you are not making the loan payment according to ...