Housing prices continue to be on average down 20% from the height of the housing bubble several years ago. These lower prices have caused many homeowners to have a negative equity in their homes. They are faced with the difficult decision of walking away from their home and suffering the consequences of a bank foreclosure. Here is some advice on what to do if you are faced with that decision.
Foreclosing your home will have a severe impact on your credit score and your ability to access credit, either for a new home or any other type of loan. Over the last year there have been many programs established to help homeowners to get out from under. Here is a summary of what programs are available and who can qualify for the aid:
FHA Refinance. The FHA will refinance mortgages into FHA loans while cutting the principal to 97.75% of your home value beginning this fall. You can qualify if you are current on payments on loans that are not FHA-insured. The lender must agree to it.
Home Affordable Modification Program (HAMP). HAMP changes loan terms to get payments below 31% of your income. Lenders must also cut principal on home that are more than 15% underwater. If your struggling to make payments on loans under $729,000 you can potentially qualify.
Home Affordable Refinance Program (HARP). HARP refinances mortgages into loans with lower rates or better terms. You can qualify if you are up-to-date on your payments and be no more than 25% underwater. Your loans must be backed by Fannie or Freddie, and the lender must agree.
Hardest Hit Fund. This program will give money to the 10 worst-off states to design programs for struggling and underwater homeowners. The details on this program are still being developed, but you can check www.financialstability.gov for more information.
Housing prices continue to be on average down 20% from the height of the housing bubble several years ago. These lower prices have caused many homeowners to have a negative equity in their homes. They are faced with the difficult decision of walking away from their home and suffering the consequences of a bank foreclosure. Here is some advice on what to do if you are faced with that decision.
