Monday, February 16, 2009, AM | Leave Comment
In most people’s cases, housing is their biggest expense. If you are having trouble making mortgage payments, you have some potential options to think about for modifying your housing cost.
As home prices continue to fall and more borrowers find themselves in need of a modification, correctly dotting the i’s and crossing the t’s has rarely been more important.
Doing a loan modification is almost as complicated as getting a mortgage in the first place, so there does tend to be lots of paperwork.
Here are some options to understand before you apply for your mortgage modifications:
Refinance to a lower interest rate mortgage
This may be an option for some homeowners, but at present, credit is very tight, and it is not easy to refinance into other mortgage products.
You have to consider whether expensive closing costs are worth what you may save in lower interest.
Ask help from existing mortgage lender
If you are really in dreadful situation that you have trouble making mortgage payments, then you can ask your existing mortgage lender for lowering your interest rate. That might mean:
- Lowering your interest rate with no additional cost
- Forgiving part of your principal
- Extending the terms of your loan.
Modification is permanent
Because modification is permanent, not all lenders would do it. Still, with home foreclosures on the rise, loan modifications are becoming more popular.
Many lenders prefer mortgage modification
Many lenders make out better by modifying existing loans than by foreclosing on properties.
1.7 million foreclosures were prevented
Hope Now, an alliance of mortgage market participants, and counselors, reports that more than 1.7 million home foreclosures were prevented by the mortgage lending industry in the first 10 months of 2008. For more information, visit Hope Now.
New home buyers
You must think carefully before you take on housing you might not be able to afford. Many young home buyers underestimate the cost of home ownership.
Calculate before you leap in the unknown
You must include the following to determine your total costs:
- Mortgage payment
- Property taxes
- Home owner’s insurance
- Any points you may have to pay
- Maintenance and repair cost.
Renting could be a better option
New home buyers must calculate the total cost of owning a home. If you cannot afford it, don’t get into something that you might not be able to fulfill the obligation successfully. Therefore, renting, in that case, is a viable option until you save enough to make a bigger down payment. Also, make sure you have a stable income.
In a Nutshell
If you have trouble making your mortgage payments, understand what the different options are before you apply for mortgage modification. If you are a first time buyer, then do all your calculations of every cost you might encounter in the near future.