How To Avoid Foreclosure by Refinancing to an FHA-Insured Loan

In these tough economic times, one of the biggest challenges one has to surpass is paying for a monthly home mortgage. Sometimes, it cannot be helped. The monthly mortgage fees greatly exceed one’s own income. While difficult, there is still hope for those going through with these same challenges, thanks to a program that assists homeowners and their respective home loans. Passed in July, the Homeowners Act of 2008 expects to assist around half a million homeowners to avoid losing their homes via foreclosure. They aim to do this through the refinancing of their home mortgage to an insured loan by the Federal Housing Administration or FHA. If you have foreclosure issues and need help in refinancing your mortgage, then here are the steps in doing so.

  • Refinance your mortgage. The refinancing act will be in effect from the 1st of October 2008 to the 30th of September 2011. It is estimated that more or less 400,000 housing mortgages will benefit from this by being eligible for the refinancing of their mortgages.
  • Evaluate home equity. The Refinancing program is specifically designed for borrowers who are threatened by foreclosure. This provides them with the means to refinance their mortgages by converting to an insured loan by the FHA. Those who are considered as mortgage holders, who meet certain qualifications, can then cancel their existing mortgage and cost-effectively refinance through a better deal, which will be a 30-year loan insured by the FHA at a fixed rate amounting to around 90% of the home’s total value. This allows the borrower to benefit from refinancing by getting a lower interest rate on their mortgage and a more easy to manage payment schedule every month.
  • Meet the qualifications for the refinancing program. To be eligible for the program, one must have the following qualifications:
      • A mortgage payment which is greater than 30% of the person’s income
      • A loan that was started by January 1, 2008
      • Must reside in the home that is mortgaged and do not have a 2nd residence.
      • Have a valid and legitimate income sources on a monthly basis.
      • Have difficulty affording the mortgage.
      • Have not intentionally skipped paying the monthly mortgage.
  • Avoiding foreclosure. Even if one has been deemed qualified for the program, the lender’s participation is consider optional and voluntary, and thus, their agreement and willingness to refinance the loan in lieu of foreclosing on the mortgage should be disclosed. If the mortgage lenders refinance your home loan, they will probably take a loss; but the loss will most probably be less than if one defaults on the mortgage and the government forecloses on the mortgage. To learn more and understand this, you can inquire from a Federal Housing Administration approved and accredited mortgage broker or a mortgage lender to ask about options in mortgage refinancing.

There is a catch to all of this, though. Due to the programmed 10% home equity included in the new refinancing, the equity is imparted with the FHA. This also includes the home’s future appreciation. In any case, make sure to read up on the different resources available on the Internet to get you more informed about your options such as


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