Foreclosure After Refinance

Refinancing to Avoid Foreclosure

Refinancing at a lower interest rate can reduce the monthly payment, making it easier for you to pay. The specific requirements to refinance may vary, depending on the lending institution; however, there are typically general guidelines that must be met. In most cases, you cannot be behind on the loan. You will also need a good credit score. Your credit report affects the interest rate you receive. The lender also considers your employment history. Homeowners must show a stable job with steady income. The home must also appraise at or above the price you originally paid. Refinancing the loan does not protect you from foreclosure. If you fall behind on the loan after a refinance, the lender has the right to foreclose.

If you are not eligible to refinance through a traditional lender, the federal government's Making Home Affordable program may provide the relief you need. Through the program, homeowners with less-than-perfect credit can refinance at a lower interest rate even if the home does not appraise at the purchase price. To qualify, you cannot be more than 30 days delinquent on the loan. Homeowners more than three months behind on their payments may be eligible for a loan modification. A loan modification has an effect similar to refinancing. The modification lowers the interest rate, extends the length of the loan by up to 10 years and may reduce the principle may to result in a more manageable payment.

In addition to losing your home, a foreclosure destroys your credit and makes finding alternative housing a challenge. The length of time it takes for a lender to foreclose on a home depends on the state and lender. If you stop making your mortgage payments, the lender will initiate the legal process of repossessing the home. Foreclosure can occur in or out of the court, depending on the state's laws. The foreclosure process generally takes anywhere from a couple months to over a year. If you are unable to pay, a sale date is scheduled. During the reinstatement period, homeowners can stop the foreclosure by paying the delinquent amount. Some state laws allow the homeowner the opportunity to redeem the home after a sale. If you choose to exercise your redemption rights, you must pay the entire balance of the loan in full.

U.S. Department of Housing and Urban Development-approved foreclosure prevention counselors are available throughout the country to offer individualized information and guidance to homeowners on the verge of foreclosure. If you are behind after refinancing or modifying the loan, the counselor can suggest other options or programs. A short sale or deed in lieu of foreclosure allow you to give up your ownership rights and avoid a deficiency judgment. The Home Affordable Foreclosure Alternatives program awards relocation funds to homeowners who exit gracefully. If you are unemployed or suffer a financial hardship, the Emergency Homeowners' Loan Program can provide up to $50,000 to cover 24 months of mortgage payments while you get back on track. If you need help locating a counselor, visit the HUD website.