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LESSON 30: WHAT TO DO IF YOU GET INTO FINANCIAL TROUBLE
(continued from previous page)
Here are some of the options
available to borrowers who miss payments, but want to avoid foreclosure:
1) Repayment plan
The company agrees to tack, say, half the amount of the first missed
payment onto each of the next two payments. These plans provide
some breathing room for borrowers with short-term financial problems,
such as expensive car repairs that make it too difficult to pay
the mortgage for one month.
2) Loan modification
The servicer actually adjusts the terms of the loan to make it affordable.
It may lengthen the amortization
schedule or lower the interest rate to cut the monthly payments,
or roll the past due amount into the loan and re-amortize the new
balance so the borrower can pay the additional debt back over time.
3) Short sale
The lender lets the borrower sell the house for less than the outstanding
loan amount, takes the proceeds and forgives any remaining debt.
4) Short refinance
The lender agrees to forgive some of the debt and refinance the
rest into a new loan.
5) Refinance with a "hard money" loan
Borrowers get hard
money loans, which have very high rates and fees, to give them
more time to sell their homes. See
Tip 2
So there you have it -- everything you ever wanted (or maybe didn't
want!) to know about mortgages. We've walked you through the lending
process from start to finish and given you some pointers about life
as a borrower after closing. By getting educated before shopping
for a loan, you've given yourself a leg up on the countless mortgage
shoppers out there who don't even know what a home loan is.
In today's mortgage world, that's the best way to
defend yourself against rip-off artists and the many traps built
into the lending process -- and to get the best possible deal.
Best of luck with your new loan!
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Tip 1:
The key to avoiding foreclosure is early intervention.
If you're going to be late on a mortgage payment, or miss
it altogether, contact your lender immediately to establish
a repayment plan.
Tip
2: Don't bury your head in
the sand and ignore your lender's phone calls if you miss
a payment! Try working with the company to find a solution
that doesn't involve foreclosure in order to preserve your
home and your credit rating.
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