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Refinancing a mortgage is one method you can use to attempt to avoid losing your home to foreclosure. This guide to how to refinance a mortgage to prevent foreclosure will detail the steps you need to take as you work through the process.
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Introduction
- If you are considering refinancing in order to prevent foreclosure, you will need to determine if you are eligible to refinance, assemble documents that support your application, and complete an application with your lender. Unlike a traditional refinancing where you solicit competitive quotes from different lenders, refinancing to prevent foreclosure will most likely require you to deal with the financial institution that is currently servicing your mortgage.
Step 1: Is Refinancing an Option?
- While in the past, the credit review for refinancing may have disqualified homeowners who were going through tough times, the Home Affordable Refinancing plan, announced in March 2009, may permit you to refinance to prevent foreclosure. In order to qualify you need to satisfy the following criteria:
- The property securing the mortgage must be your primary residence.
- The loan must be held by Fannie Mae or Freddie Mac. If you are unsure if your loan is held by either of these agencies, call:
- Fannie Mae, 1-800-7FANNIE (8 a.m. to 8 p.m. EST).
- Freddie Mac, 1-800-FREDDIE (8 a.m. to 8 p.m. EST)
- All mortgage payments over the previous 12 months must have been made within 30 days of the due date.
- The amount due on the mortgage needs to be no greater than 105% of the market value of your house.
Step 2: Gather Information
- You'll need to supply financial information to the bank when you apply, so gather the following documents before making the call:
- Recent pay stubs and your latest tax return and W-2s.
- Account balances and monthly payments on all other debt, including:
- Any second mortgages or home equity lines of credit
- Credit cards
- Student loans
- Car loans
Step 3: Contact Your Lender
- After determining that you are eligible for refinancing, and after gathering your information, you should call the bank that services your mortgage. Tell them you would like to apply for refinancing under the Home Affordable Refinance plan.
Conclusion
- When looking to refinance to prevent foreclosure, it is important to act early, before you've missed a payment. Be prepared with your financial information before you contact the bank, and specifically request the Home Affordable Refinance program. If the bank determines that you are not eligible, you may still qualify for the Home Affordable Modification program.
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