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Advice on Refinancing While in Foreclosure

Mark Cappel
UpdatedAug 22, 2008

My house is currently in foreclosure, behind 18,000. Will refinancing be an option for me?

My house is currently in foreclosure, behind 18,000. Will refinancing be an option for me?

Refinancing in foreclosure is very different from your usual refinancing. When you apply for a conventional mortgage refinance, the most important factors that a lender looks at when deciding whether or not to approve the loan is your credit score and mortgage payment history. In general, if you have not been more than 90 days late on your mortgage payments, and your FICO credit score is above 500, conventional lenders will consider your application. They may not approve it, but they will at least take a look at it. When you go beyond 90 days late on your mortgage payments, no conventional lender will review your application, no matter how much money you make or how much better your situation is now than when you fell behind. Once you are considered 120 days late or behind on the mortgage, or your credit score falls below 500, the conventional lending industry simply will not take the risks of lending to you anymore.

Depending on your income, credit score, value of your home and the amount of your equity, you can apply with a new lender to refinance your existing mortgage. Although it might be difficult to secure new financing with a default on your existing mortgage, if you have enough equity in your home, this option might be attractive to a new lender. Although this option may likely create a loan with higher interest rates, a sizable upfront fee and a longer time for pay-off, it may be the best option for you. With your home refinanced, you will become immediately current, the foreclosure will cease and you will be able to enjoy your home. Certainly your existing lender would be happy to have their loan paid off through a refinance.

If you want an introduction to pre-screened mortgage lenders, makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs at: Mortgage Refinance Quote.

You should contact several potential lenders to discuss the loan terms they can offer you on a refinance loan. After speaking with several lenders, you should be able to determine whether or not a refinance loan is a financially viable option for you. In case refinancing does not work out you can try these other alternatives:

Mortgage Modification - If you can make your regular payment now, but cannot catch-up the past due amount, the lender might agree to modify your mortgage. One solution is to add the past due amount into your existing loan, financing it over a long term. Modification might also be possible if you no longer have the ability to make payments at the former level. The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce your payments).

A Repayment Plan - If your account is past due, but you can now make payments, the lender might agree to let you catch up by adding a portion of the past due amount to a certain number of monthly payments until your account is current.

Deed in Lieu of Foreclosure - When the lender allows you to give-back your property--and forgives the debt. It does have a negative impact on your credit record, but not as much as a foreclosure. The lender might require that you attempt to sell the house for a specific time period before agreeing to this option, and it might not be possible if there are other liens against the home.

Selling Your Home - If catching up is not a possibility; the lender might agree to put foreclosure on hold to give you some time to attempt to sell your home.

You can read more about foreclosures on our website.

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