With the number of foreclosures currently on the market, many lenders are willing to work with you to stop house foreclosure with loan modification programs. Each lender is different in what they will offer you so calling your bank is the best place to start. They will want to know why you are behind on your mortgage payments so be honest with them. There may be special programs they can offer you for your situation.
If you have some equity in your home, you may be able to refinance your loan with your bank to roll in the back payments and fees that you owe them. A traditional refinance will require that you owe less on the home than its current market value.
There will be closing costs for this type of loan but it is possible that those costs may be able to be rolled into the loan as well. It all depends on how much equity you currently have in the home. It is likely that an appraisal will be needed to confirm the value of the property.
Financial Hardship Loan Modifications
Many banks will consider a loan modification due to financial hardship. This could be death or illness in the family, divorce, unemployment, or major medical bills. Only your lender can tell you what they would consider financial hardship. In these cases, your bank may agree to stop house foreclosure by modifying your loan payment to something you can afford.
Closing costs and an appraisal may not be necessary for this type of modification. Be prepared to provide your lender with proof of your financial hardship and verification of your current income.
Some banks will consider a principal reduction on the loan to avoid foreclosure and some are even required to do so by the government. If you owe more on your home than what it is worth, this may be a good option to stop house foreclosure. Check with your lender to see if they have this program available and what documentation you need to provide to them.
If you are unsure of what the current value of your home is, a good place to start is with your property tax records. While these will not be as accurate as an appraisal, they are a good place to start to get a rough idea of what your home is worth. You should get one of these from your local government agency every year.
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By Robert Charlson