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What Mortgage Relief Options are Out there?

Mortgage debts are rapidly becoming a problem for many Americans. Between a vacant job market and struggling economy, many people are having a hard time keeping up with their personal debts and mortgages. As the threat of foreclosure looms one good thing has come about: more people are getting educated about their mortgage debt options.

Refinancing a mortgage can help lower monthly mortgage payments by renewing the loan with better interest rate and terms. However, there is much to consider before agreeing to refinance a mortgage. First, qualifying for refinancing can be tough. Many lenders require a minimum of 675 or better credit score in order to qualify. If there has ever been a late or missed mortgage payment, that factor can lead to immediate disqualification. Second, refinancing isn’t an option if already in default. Lenders are generally not willing to refinance a mortgage that is already in default or for a home that is considered to be “underwater”. Last, refinancing can be expensive even if a borrower and home qualifies. Since refinancing creates a new mortgage loan the borrower is subject to paying out of pocket closing costs. Just like the original loan, the homeowner will be liable for paying these fees at the time of closing. Further, the new loan starts the loan term over leaving the homeowner void of any progress made towards the previous mortgage loan.

Loan Modifications

Having been the source of much attention in recent months, mortgage loan modifications can be a great tool for saving a home from foreclosure and getting caught up on mortgage debts. A loan modification changes the terms and conditions of the existing mortgage loan, which saves the homeowner from additional closing costs associated with refinancing. A loan modification can lower payments by extending the life of the loan, and save money by temporarily lowering the interest rate or suspending the payment requirements. However, they too come with some additional considerations. First, the borrower must be already in default or close to defaulting on their loan to qualify. This means a tough job for homeowners to convince the lender they are financially in need of the modification, but not so much so that they can’t continue payments once modified. Also, lenders hold strict qualification standards for approving loan modifications and many homeowners find the process to be difficult.
Short Sales

Although not a preferred option for most, short sales can be a better solution to foreclosure. Rather than lose the home involuntarily to the bank and suffer credit damage, a short sale can present a chance to voluntarily give up the home after a sale in exchange for being absolved of mortgage debts. Short sales are typically one of the later options to pursue as they can be cumbersome at times. The lender holds the power of approval over the sale, which means they can take months to accept or reject offers on the home. Also, the homeowner is faced with the responsibility of securing offers and selling the home which can be a stressful process.

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