YOUR OPTIONS

If you’re a homeowner and you’re worried about how to pay your mortgage, don’t despair. You have options.The lending community is on your side, working with state and federal agencies to help homeowners hang on. The Obama Homeowner Affordability and Stability Plan has the potential to help nine million households hold on to their homes. State governments are also taking action. With $75 billion dollars set aside to help struggling homeowners, it’s never been more possible to keep your home. You’ll have to start by contacting your lender and asking whether you qualify for one of these home-saving options.

Getting out of your old loan and into a new one can relieve you from the instability of an adjustable mortgage and put you into a low-rate fixed mortgage. Refinancing is an option even for those who owe more than their home is worth. Recent changes may allow refinancing up to 105 percent of your home’s current market value. If you qualify, fixed rates are at all-time lows. Mortgages can be extended to as long as 40 years to keep payments as low as possible.

Loan modification

Modifying your loan can reduce your interest rate at least temporarily, and possibly even permanently, giving you time to catch up on missed payments. In some cases a lender will modify your loan to reduce the amount of your principal.

A short-fi, short for a “short refinance,” is a relatively new option where the current lender accepts a lower payoff amount so that the borrower can refinance into a new loan. This option requires cooperation from two lenders, first from the lender who will be taking a loss on the current mortgage, and second from the lender who will be granting the new mortgage. A short-fi can be an option for those who are struggling to make payments that are increasing.

For those who cannot qualify for a refinance, loan modification or short-fi, starting over may be the best option. For those who decide not to stay in their current homes, a foreclosure or short sale are viable options.

The best way to handle the difficult challenge of unaffordable mortgage payments is to get into action. This is the best way to protect your credit score and access the best solution before any potential damage has the chance to occur. Remember, your credit score is important. It may not feel like it when you’re struggling to make your mortgage payments, but your credit score will often determine how favorable the terms of your solution will be. In addition, your credit score can impact other financial areas, such as your credit card rates or your ability to get an auto loan.

As a borrower and homeowner, you have a tremendous amount of power in your hands. Start by talking with your lender or mortgage servicer, the company that sends you your monthly statements and processes your payments. You can also work through Mortgage Outreach services to find a solution.

Before you call, figure out how much you can afford. Also, gather the information you’ll need, including proof of income, bank statements and tax returns. Most importantly, be patient and persistent. This is an unprecedented time for lenders and borrowers alike. Banks and mortgage servicers are overwhelmed with callers who are in the same situation that you’re in, so the process may be frustrating at times.

Remember, what you do now will affect your financial future. Your actions today could save your home.