But then the rate freeze ends. The mortgage rate begins to rise. And with it the payments also go up -- sometimes rising by hundreds of dollars a month. The once affordable payments now squeeze the household budget. And then the next rate hike goes into effect. A once comfortable budget is now bleeding red and there is no hope for it to stop. What can a home owner do to make the bleeding stop?
When a homeowner sees that they are not going to be able to make their next mortgage payment, they need to contact their lender right away. If it is a short term problem, many lenders will forebear the amount for a month or two until you can pay it back. Most people are willing to take on a second job for the short term to get out of a financial hole. But, with payments beyond the household’s budget, it is not that simple. Once rates adjust, they are not going to go back down any time soon.
The home owner needs to take the initiative and speak with their lender. When the loan gets in arrears, the lender becomes more receptive to listening but they also get more nervous about seeing the money get paid back. A foreclosure refinance to a fixed rate loan may be the answer to both of their troubles. But many lenders are shy about refinancing on a property so near foreclosure. You may need to look for a broker to help you.
Shopping for a foreclosure refinance can be tricky. If you use a broker to try to get a refinance, you may just be racking up fees instead of actually getting yourself out of foreclosure. Many brokers use the same lenders. You may put your application in with three mortgage brokers and all three of them may use the same lender. If you are rejected by the lender once, you will be rejected by that lender again and again.
The first question to ask the broker is which mortgage lenders they are going to be submitting your application to. If you know that ABC Mortgage Company has already rejected you, then ask the mortgage broker to submit your application to another company or find another broker. Another option is to submit your application to lenders directly. But this can be tricky since mortgage brokering is not for the beginner.
Even if you have been rejected left and right, do not lose hope. There are non-traditional lenders, such as hard money lenders and private institutions that specialize in foreclosure loans, that may be able to help you refinance your property before it is actually foreclosed on by the current bank. Their requirements are usually more lenient than the usual mortgage companies, involving no credit check.
Keep researching your options to make sure that you have taken every opportunity to avoid losing your home to foreclosure. Even with credit problems due to being out of work for a long time, there are still lenders out there who may work with you, and this may be one important and appropriate solution to foreclosure that many homeowners do not even consider.