Most people think that a good way to avoid foreclosure is to start over...refinance the mortgage and just start over.
Most people can't refinance, which is a problem.
It is very hard to stop a foreclosure. There are a lot of mortgage brokers and lenders out there who will waste your time by telling you what you want to hear. When you are trying to keep your house from going into foreclosure, you can't waste time. After you miss your first mortgage payment, you only have between 4 and 8 months before you lose your house. How a foreclosure is handled depends on the state and the lender.
People in trouble have always been easy prey for mortgage brokers and lenders. They can't get you refinanced, but they say they can help you avoid foreclosure. What were they thinking? They don't get paid if you don't close, so why would they take your application and stop you from looking at other options? Mortgage brokers are taught to get as many applications as they can to bring in business. Some companies even have sales meetings to make sure they get applications even if they don't close. You might be surprised to learn that mortgage companies follow the rule "throw everything at the wall and see what sticks." You are in a scary situation, but everyone treats you the same. You were never going to "stick," and now, after a month or two, you are even further behind on your mortgage payments.
Some mortgage brokers or lenders make money off of you by charging you a fee up front. They know for sure that no one can refinance your mortgage, but they tell you that for a fee up front, they will start working on your loan. A pretty good way to run a business, don't you think? When you want to avoid foreclosure, they tell you everything you want to hear. They get paid because you believe them, and then they move on to the next person who doesn't know what's going on. After they get your money, they won't spend another minute on you.
Who can refinance so they don't lose their home?
You need to have money in your house. You need at least 10% to 25% equity in your property, depending on how far along you are in the process. You will need more equity the further along you are in the foreclosure process. If you are behind on more than two payments and don't have at least 25% equity, it is nearly impossible to refinance. Make sure you count all the late fees and legal fees when you figure out the equity.
When you refinance, it makes a huge difference how far along you are in the foreclosure process. When you are late on your mortgage for more than 90 days, everything changes. If you can still refinance after that, the rate will change in a big way. That's why it's so important to find the right mortgage broker or lender. If they don't have a lot of experience with these kinds of loans, the process could take too long, and then it would be too late.
Some private lenders might be able to refinance your loan so that you don't lose your home. Most of the time, these are called "hard money lenders." They decide whether or not to give you the money. There are no rules for underwriting. Each case is different. These can cost a lot of money. The interest rate and fees will probably be too high for you to pay.
This is a very important point. What will your new payment be, even if you can refinance? If you are having trouble making the payment now, you can be sure that the payment will go up if you refinance to avoid foreclosure. Any loan you take out will cost you money.
Do not even think about refinancing your home to avoid foreclosure if you have no equity in it. I hope that this article helped you and taught you something about how to stop foreclosure. If you've learned anything, I hope it's that not many people can help you stop foreclosure. You'll waste time and money only to find out that nobody can help you.
Best of luck!
